iQuartic v. W. Barrett Simms

Filing 49

Judge Nathaniel M. Gorton: Memorandum & ORDER entered allowing 4 MOTION for Preliminary Injunction filed by iQuartic (Danieli, Chris)

United States District Court
District of Massachusetts
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iQUARTIC, INC.,
Plaintiff,
v.
W. BARRETT SIMMS,
Defendant.

Civil Action No.
15-13015-NMG

MEMORANDUM & ORDER
GORTON, J.
This case arises from a breakdown of an employment
relationship between a software company and its former employee.
Plaintiff iQuartic, Inc. (“iQuartic”) alleges that defendant W.
Barrett Simms (“Simms”) breached his employment and
confidentiality agreements during the course of his employment
and after his resignation.
Pending before the Court is plaintiff’s motion for a
preliminary injunction to enjoin defendant to maintain the
status quo on his electronic devices, to produce all electronic
devices for data imaging, to compel the defendant to appear at
an exit interview and to prohibit defendant from disclosing
confidential information.

For the reasons that follow, the

Court will allow the motion.
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I.

Background
iQuartic is a health information technology start-up

founded in 2012 that develops software for medical providers and
health insurance companies.

In October, 2014, it hired Simms as

its Director of Engineering to write software code for its pilot
software product.
A.

Employment and confidentiality agreements

At the start of his employment with iQuartic, defendant
signed an employment agreement whereby he agreed 1) “not to
engage in any other business or private services to any other
business,” 2) to hold in a “fiduciary capacity...all proprietary
or confidential information” belonging to iQuartic and 3) to
attend an exit interview for the purposes of, inter alia,
“surrendering to [iQuartic] all proprietary, confidential
information” belonging to it.
Simms also signed a confidentiality agreement through which
he was obligated not to disclose any iQuartic confidential
information during or after his employment except in connection
with his employment duties.

Within 48 hours of a request by

iQuartic, all confidential information and company materials
were to “be returned to [iQuartic] and completely and
permanently purged from” personal files.

The confidentiality

agreement further provided a work for hire provision in which
Simms agreed that all writings, documents, developments and
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computer programs that he created or developed at any time
during his employment would be considered as “developed for the
sole and exclusive use of an ownership by [iQuartic].”
B.

Alleged breach of the agreements

Plaintiff contends that in about February, 2015, Simms
became uncooperative and increasingly argumentative, and he
stopped coming into the office on a regular basis.

Although

plaintiff allegedly promised to complete software development by
the end of 2015, upon inquiry in May, 2015, defendant revealed
that the software was only 2% complete and would take two
additional years to complete.
In June, 2015, defendant resigned from iQuartic and
allegedly refused 1) to attend an exit interview as required by
his employment contract, 2) to surrender proprietary
confidential information and company materials belonging to
iQuartic and 3) to provide any significant knowledge transfer
about the software to his replacement.

Plaintiff contends that

it has dedicated more than 160 hours to decipher and run
defendant’s software code but has been unsuccessful.

Finally,

plaintiff alleges that Simms divulged proprietary and
confidential information about iQuartic’s pilot product to two
companies during unauthorized meetings.
In his opposition to plaintiff’s motion for a preliminary
injunction, defendant disputes iQuartic’s contentions that he
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1) refused to participate in an exit interview as required by
his agreement, 2) shared iQuartic proprietary information with
third parties in violation of the confidentiality agreement and
3) hid code and took plaintiff’s proprietary information when he
resigned from the company.
C.

Procedural history

Plaintiff filed its complaint in July, 2015 for
1) violation of the Computer Fraud and Abuse Act, 18 U.S.C.
§ 1030, et seq. (Count I), 2) breach of contract (Counts II and
III), 3) breach of the covenant of good faith and fair dealing
(Count IV), 4) interference with advantageous relations and/or
contractual relations (Count V), 5) misappropriation of
proprietary, confidential and trade secret information (Count
VI), 6) violation of M.G.L. c. 93A (Count VII) and 7) fraud
(Count VIII).
Plaintiff then moved ex parte for a temporary restraining
order (“TRO”) and a preliminary injunction, alleging that Simms
“fled the state of Massachusetts to avoid service of iQuartic’s
Complaint” and misappropriated plaintiff’s proprietary
information.

The Court held an ex parte hearing with respect to

the motion and entered a TRO against defendant.
Simms was ordered 1) to hold and maintain the status quo of
all electronically stored information (“ESI”) in his possession,
including iQuartic ESI, 2) to turn over to iQuartic all
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information in his possession necessary to utilize the software
code that he was paid to develop while at iQuartic and 3) to
produce all personal computers and personal electronic devices
for analysis by a neutral and independent forensics expert to
itemize all iQuartic ESI stored in defendant’s computers and to
verify that he had not transferred or retained any iQuartic
proprietary information.
Upon receiving service of the TRO, defendant produced his
cellular phone, a thumb drive and a tablet for forensic review.
He represented that there were no additional devices used in
connection with his employment with iQuartic.

Plaintiff

contends that the preliminary results indicate that the thumb
drive contains no data and had never been connected to
defendant’s tablet in the first place.

Instead, evidence

appeared to reveal that additional devices had been connected to
the tablet but were not provided for examination.

The analysis

also revealed that a secure data deletion tool was run on the
tablet at least twice on August 5, 2015, the same date on which
defendant was served with the summons and complaint in this
case.
On August 13, 2015, the Court heard oral argument from
counsel regarding plaintiff’s motion for a preliminary
injunction and plaintiff’s motion for an emergency writ of
attachment of real estate.

The Court urged the parties to
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conduct the agreed upon exit interview within one week.

The

Court informed the parties that if they were unable to agree
upon a temporary resolution of their dispute, it would extend
the TRO, enter a modified attachment of defendant’s real estate
and subsequently enter some sort of preliminary injunction for
plaintiff.
Shortly thereafter, the Court extended the TRO to August
28, 2015 with the additional provision that enjoined defendant
from divulging to non-parties any iQuartic confidential
information.

The Court also entered a writ of attachment of

defendant’s property to the value of $100,000.

Because the

parties have been unable to reach an accommodation, the Court
proceeds to impose one.
II.

Personal jurisdiction and venue
Before assessing the parties’ arguments regarding the

preliminary injunction, the Court first addresses the contested
issues of personal jurisdiction and venue.
A.

The parties’ choice-of-law provisions

Forum selection clauses “are prima facie valid and should
be enforced unless enforcement is shown by the resisting party
to be ‘unreasonable’ under the circumstances.” OsComp Sys., Inc.
v. Bakken Exp., LLC, 930 F. Supp. 2d 261, 268 (D. Mass. 2013).
The parties in this case do not dispute the principle that
their choice-of-law provisions will govern the Court’s personal
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jurisdiction and venue analyses.

Rather, the parties disagree

on whether the choice-of-law provision in the employment
agreement supersedes the choice-of-law provision in the
confidentiality agreement.
Defendant contends that the confidentiality agreement
contains an express choice-of-law provision dictating that the
agreement be governed by the laws of Pennsylvania for personal
jurisdiction and venue purposes.
Plaintiff asserts that the Massachusetts choice-of-law
provision in the employment agreement preempts the Pennsylvania
choice-of-law provision in the confidentiality agreement.

The

employment agreement expressly provides that the employment
agreement, the confidentiality agreement and all ancillary
agreements “shall be governed by the laws of the Commonwealth of
Massachusetts.”

Plaintiff thus asserts that the Massachusetts

choice-of-law provision controls and renders the Pennsylvania
choice-of-law provision ineffective.
The Court agrees with plaintiff.

The employment agreement

expressly incorporates the confidentiality agreement by
reference.

The choice-of-law provision in the employment

agreement governs all disputes arising out of both the
employment agreement and the confidentiality agreement.
Massachusetts law thus governs the personal jurisdiction and
venue determinations in this case.
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B.

Personal jurisdiction

The Massachusetts long-arm statute for personal
jurisdiction, M.G.L. c. 223A, § 3, reaches the full extent that
the Constitution allows, and so the Court proceeds directly to
the constitutional analysis. See Sawtelle v. Farrell, 70 F.3d
1381, 1388 (1st Cir. 1995).

The Due Process Clause requires minimum

contacts between a nonresident defendant and the forum state
such that the exercise of personal jurisdiction over that
defendant accords with “traditional notions of fair play and
substantial justice.” Int’l Shoe Co. v. Washington, 326 U.S.
310, 316 (1945).
Personal jurisdiction can be specific or general. Pritzker
v. Yari, 42 F.3d 53, 59 (1st Cir. 1994).

Specific jurisdiction

exists when the plaintiff's cause of action arises out of or
relates to the defendants’ contacts with the forum state. Id. at
60.

Specific jurisdiction is appropriate when 1) the claims

arise out of or are related to the defendants’ in-state
activities, 2) the defendants have purposefully availed
themselves of the laws of the forum state and 3) the exercise of
jurisdiction is reasonable under the circumstances. Sawtelle, 70
F.3d at 1389.

Alternatively, general jurisdiction exists when

the defendant has engaged in “continuous and systematic
activity”, unrelated to the suit, in the forum state. Id.

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The Court finds that it has personal jurisdiction over
defendant under Massachusetts law.

Defendant lived in

Massachusetts and is thus subject to general jurisdiction.
Alternatively, defendant is subject to specific jurisdiction
because he was employed by plaintiff in Massachusetts, the
employment and confidentiality agreements were executed in
Massachusetts and all of defendant’s alleged misconduct occurred
in Massachusetts.

Because the Court has personal jurisdiction

over defendant, preliminary injunctive relief may be imposed.
C.

Venue

The Massachusetts law on venue states that “if any one of
the parties thereto lives in the commonwealth,” the venue for a
transitory action properly lies “in the county where one of them
lives or has his usual place of business.” M.G.L. c. 223, § 1.
See also M.G.L. c. 223, § 2 (providing that the venue for a
transitory action in a district court properly lies in the
judicial district, or an adjacent judicial district, where one
party lives or has his usual place of business).
The Court finds that venue is proper in this Court because
defendant resided in Massachusetts while employed by plaintiff.
III. Plaintiff’s Motion for a Preliminary Injunction
A.

Legal standard

In order to obtain a preliminary injunction, the moving
party must establish
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(1) a substantial likelihood of success on the merits,
(2) a significant risk of irreparable harm if the
injunction is withheld, (3) a favorable balance of
hardships and (4) a fit (or lack of friction) between
the injunction and the public interest.
Nieves-Marquez v. Puerto Rico, 353 F.3d 108, 120 (1st Cir. 2003)
(citation omitted).

Out of these factors, the likelihood of

success on the merits “normally weighs heaviest on the
decisional scales.” Coquico, Inc. v. Rodriguez-Miranda, 562 F.3d
62, 66 (1st Cir. 2009).
The Court may accept as true “well-pleaded allegations [in
the complaint] and uncontroverted affidavits.” Rohm & Haas Elec.
Materials, LLC v. Elec. Circuits, 759 F. Supp. 2d 110, 114, n.2
(D. Mass. 2010) (quoting Elrod v. Burns, 427 U.S. 347, 350, n.1
(1976).

The Court may also rely on otherwise inadmissible

evidence, including hearsay, in deciding a motion for
preliminary injunction. See Asseo v. Pan American Grain Co.,
Inc., 805 F.2d 23, 26 (1st Cir. 1986).
B.

Application
1.

Likelihood of success on the merits
i.

Computer Fraud and Abuse Act, 18 U.S.C.
§ 1030 (Count 1)

A claim under 18 U.S.C. § 1030(a)(4) requires a plaintiff
to prove that the defendant
knowingly and with intent to defraud, accesse[d] a
protected computer without authorization, or exceed[ed]
authorized access, and by means of such conduct
furthere[d] the intended fraud and obtain[ed] anything
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of value, unless the object of the fraud and the thing
obtained consists only of the use of the computer and
the value of such use is not more than $5,000 in any 1year period.
18 U.S.C. § 1030(a)(4).

Similarly, a claim under 18 U.S.C.

§ 1030(a)(5)(A) requires a plaintiff to demonstrate that the
defendant
intentionally accesse[d] a protected computer without
authorization, and as a result of such conduct,
recklessly cause[d] damage.
18 U.S.C. § 1030(a)(5)(A).
The Court finds that plaintiff has demonstrated a
substantial likelihood of success on its federal claims because
there is evidence that defendant 1) had access to plaintiff’s
computer systems and protected information, 2) refused to
surrender all proprietary and confidential information upon
termination of his employment, 3) shared details of his work
product with plaintiff’s prospective clients during unauthorized
meetings and 4) caused plaintiff harm by forcing it to expend
time and effort interpreting his code without the necessary
information and by jeopardizing plaintiff’s future business
prospects.
ii.

Breach of contract (Counts 2 and 3)

Under Massachusetts common law, a plaintiff with a breach
of contract claim must show that 1) the parties reached a valid
and binding agreement, 2) the defendant breached the terms of

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that agreement and 3) the plaintiff’s damages are a proximate
cause of that breach. Michelson v. Digital Fin. Servs., 167 F.3d
715, 720 (1st Cir. 1999).
The Court finds that plaintiff has demonstrated a
likelihood of success on its breach of contract claims because
there is evidence that 1) the parties signed valid employment
and confidentiality agreements, 2) defendant withheld
plaintiff’s proprietary and confidential information despite his
contractual obligations to the contrary and 3) defendant’s
conduct proximately caused plaintiff to suffer delays in
developing its pilot product.
iii. Misappropriation of trade secret
information, M.G.L. c. 93, § 42 (Count 6)
A plaintiff can establish misappropriation of trade secrets
under M.G.L. c. 93, § 42 by proving that defendant unlawfully
took, carried away, concealed, copied, or fraudulently or
deceptively obtained, any trade secret, from any person or
corporation, with the intent to convert the information to his
own use. M.G.L. c. 93, § 42.
The Court finds that plaintiff has established a likelihood
of success on its trade secret claims because of evidence that
defendant spoke to the company’s prospective clients about the
company’s pilot product during unauthorized meetings.

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2.

Irreparable injury

Irreparable injury is “a substantial injury that is not
accurately measureable or adequately compensable by money
damages.” Ross-Simons of Warwick v. Baccarat, Inc., 102 F.3d 12,
19 (1st Cir. 1996).

Plaintiffs alleging irreparable injury must

show more than a “tenuous or overly speculative forecast of
anticipated harm.” Id.

Examples of irreparable injuries include

loss of incalculable revenue and harm to goodwill or reputation.
Id. at 19-20.

In the preliminary injunction context, the First

Circuit Court of Appeals measures irreparable harm
on a sliding scale, working in
party’s likelihood of success
the strength of the showing
harm depends in part on the
success shown.

conjunction with a moving
on the merits, such that
necessary on irreparable
degree of likelihood of

Braintree Labs, 622 F.3d at 42-43 (internal quotation marks and
citations omitted).

The Court has already determined that the

plaintiff has a substantial likelihood of succeeding on the
merits of its federal, contract and trade secret claims.
Plaintiff therefore has a lower threshold to overcome to
establish irreparable harm.
Plaintiff claims that defendant’s refusal to turn over all
of plaintiff’s proprietary and confidential information in his
possession has delayed the company’s development of the pilot
product and potentially jeopardizes the company’s ability to
deliver the product to its client.
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Plaintiff is a start-up

company and its future business success depends heavily on its
ability timely to deliver functional products to its initial
clients.

Plaintiff alleges that it now faces a threat to its

existence as a business.

The Court finds the claim credible and

therefore plaintiff has met the lower threshold of demonstrating
irreparable harm.
3.

Remaining factors

Plaintiff contends that the balance of equities tips in its
favor because a preliminary injunction will not harm defendant,
who has already agreed to injunctive relief in the event that
the Court finds a breach, and because plaintiff will suffer
immediate and irreparable harm without the preliminary
injunction. Defendant does not contest plaintiff’s arguments.
The Court therefore concludes that the balance of equities tips
in plaintiff’s favor.
Finally, plaintiff contends that its requested relief
comports with the public interest because prohibiting computer
fraud and abuse, enforcing contractual obligations, protecting
trade secrets and creating innovation incentives are in the
public interest.

Defendant responds that a preliminary

injunction would be contrary to the public interest because
plaintiff only instituted this lawsuit out of retaliation and
bad faith.

The Court finds that plaintiff’s motive for

initiating this lawsuit may be relevant later but consideration
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of motive is beyond the scope of the pending motion.

The Court

agrees with plaintiff that a preliminary injunction is in the
public interest.
Accordingly, the Court will allow plaintiff’s motion for a
preliminary injunction.
IV.

Security under Fed. R. Civ. P. 65(c)
A movant for injunctive relief must give security in an

amount that the Court considers proper to pay costs and damages
sustained by any party found to have been improvidently
enjoined. Fed. R. Civ. P. 65(c).

The Court will therefore

require the posting of a security bond in the amount of $10,000
to cover defendant’s potential cost of any negative consequences
that may result from the issuance of the preliminary injunction.

ORDER
For the foregoing reasons, plaintiff’s motion for a
preliminary injunction (Docket No. 4) is ALLOWED, and injunctive
relief in the form of the preliminary injunction attached hereto
will be entered.

So ordered.
/s/ Nathaniel M. Gorton
Nathaniel M. Gorton
United States District Judge
Dated September 2, 2015
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