MU SIGMA, INC. v. AFFINE ANALYTICS CORPORATION et al
Filing
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OPINION. Signed by Judge Freda L. Wolfson on 3/24/2014. (gxh)
**NOT FOR PUBLICATION**
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
____________________________________
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MU SIGMA, INC.,
:
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Civ. Action No.: 12-1323 (FLW)
Plaintiff,
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:
v.
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OPINION
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AFFINE. INC., et al.,
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Defendants.
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____________________________________:
WOLFSON, District Court:
On July 16, 2013, this Court dismissed thirteen counts asserted against
Defendants Affine, Inc. (“AI”) and Affine Analytics Corp. (“AAC”) (collectively,
“Defendants”) in Plaintiff Mu Sigma, Inc.’s (“Mu Sigma” or “Plaintiff”) Second
Amended Complaint (“July Decision”). In the present matter, Plaintiff moves for partial
reconsideration of the July Decision, or in the alternative, for leave to file a third
amended complaint on the grounds that the amendments would serve the interest of
justice pursuant to Fed R. Civ. P. 59(e). For the reasons that follow, the motion for
reconsideration is DENIED, and the motion for leave to file a third amended complaint is
GRANTED in part and DENIED in part.
BACKGROUND
For the purposes of judicial economy, I will not repeat the facts here; rather, the
factual recitation of this case in the July Decision is incorporated herein. I will instead
set forth the procedural history. Plaintiff commenced this action in the Law Division of
the New Jersey Superior Court, Somerset County on December 20, 2011. In the initial
Complaint, Plaintiff filed an order to show cause, whereby it sought preliminary
injunctive relief against the original defendants, including AI and AAC. In response, on
March 2, 2012, the original defendants removed the case to this Court based on diversity
jurisdiction. After removal, Plaintiff renewed its motion for a preliminary injunction. The
original defendants then moved to dismiss the claims against them for lack of personal
jurisdiction. On July 17, 2012, the Court dismissed all the defendants—Affine Analytics
Ltd. and the founders of the three Affine corporations, Abhishek Anand, Manas Agrawal,
Shivaprasad K.T., and Vineet Kumar (hereinafter, the “Founders”)—except for AI and
AAC.
On December 3, 2012, AI and AAC filed a motion to dismiss Plaintiff’s Second
Amended Complaint (“SAC”) for failure to state a claim. On July 17, 2013, this Court
granted Defendants’ motion and dismissed all thirteen counts in the SAC. Plaintiff now
seeks reconsideration of the dismissal as to the following claims: (1) tortious interference
with prospective economic advantage, (2) tortious interference with contractual relations,
(3) unfair competition, (4) misappropriation of trade secrets, and (5) alter ego. Further,
Plaintiff submits that the Court should have afforded Plaintiff another opportunity to
amend the SAC. In that regard, Plaintiff requests, in the alternative, that the Court
Plaintiff grant leave to file a Third Amended Complaint. In connection with its request,
Plaintiff has submitted a proposed Third Amended Complaint, which purportedly
includes more factual specificity of its claims against Defendants. I will review and set
forth those allegations in more detail later in this Opinion.
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DISCUSSION
I.
STANDARD OF REVIEW
A. Motion For Reconsideration
Local Civil Rules 7.1(i) governs a motion for reconsideration.1 Clark v. Prudential
Ins. Co. of Am., 940 F. Supp. 2d 186, 189 (D.N.J. 2013); see L. Civ. R. 7(i). The Rule
states that “a motion for reconsideration shall be served and filed within 14 days after the
entry of the order or judgment on the original motion by the Judge or Magistrate Judge.”
L. Civ. R. 7.1(i). A party may seek reconsideration of a court’s decision if the party
“believes the Judge or Magistrate Judge has overlooked” a “matter or controlling
decisions” when it ruled on the motion. Clark, 940 F. Supp. 2d at 189. “The word
‘overlooked’ is the operative term in the Rule.” NL Industries, Inc. v Commercial Union
Ins. Co., 935 F. Supp.
In order to succeed on a motion for reconsideration, the movant has the burden of
demonstrating at least one of the following grounds: “(1) an intervening change in the
controlling law; (2) the availability of new evidence that was not available when the court
[issued its order]; or (3) the need to correct a clear error of law or fact or to prevent
manifest injustice.” Max’s Seafood Café v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999).
To succeed under the third prong, “the movant must show that ‘dispositive factual
matters or controlling decisions of law were brought to the court’s attention but not
considered.’” D’Argenzio v. Bank of America Corp., 877 F. Supp. 2d 202, 207 (D.N.J.
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A motion for reconsideration pursuant to L. Civ. R. 7(i) is “the ‘functional
equivalent’ of motions to alter or amend judgment under Federal Rule of Civil Procedure
59(e).” Einhorn v. Kaleck Bros., Inc., 713 F. Supp. 2d 417, 426 (D.N.J. 2010) (quoting
Jones v. Pittsburgh Nat'l Corp., 899 F.2d 1350, 1352 (3d Cir.1990)).
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2012). Furthermore, the movant must demonstrate that (1) the holdings on which it bases
its request were without support in the record, or (2) would result in “manifest injustice”
if not addressed. Leja v. Schmidt Mfg., Inc., 743 F. Supp. 2d 444, 456 (D.N.J. 2010).
In addition, “[a] motion for reconsideration should not provide the parties with an
opportunity for a second bite at the apple.” Tischio v. Bontex, Inc. 16 F. Supp. 2d 511,
533 (D.N.J. 1998). In other words, Local Rule 7.1(i) “does not permit a Court to rethink
its previous decision, rather, the rule permits reconsideration only when ‘dispositive
factual matters or controlling decisions of law’ were presented to the court but were
overlooked.” Buffa v. N.J. State Dep't of Judiciary, 56 Fed. App'x 571, 575 (3d Cir.
2003); see P. Schoenfeld Asset Management LLC v. Cendant Corp., 161 F. Supp. 2d 349,
352 (D.N.J. 2001) (“A party seeking reconsideration must show more than a
disagreement with the Court’s decision, and recapitulation of the cases and arguments
considered by the court before rendering its original decision fails to carry the moving
party’s burden.”) (citations and quotations omitted); see also CPS MedManagement LLC
v. Bergen Regional Medical Center, L.P., 940 F. Supp. 2d 141, 168 (D.N.J. 2013) (“The
motion [for reconsideration] is not a vehicle for a litigant to raise new arguments or
present evidence that could have been raised prior to the initial judgment.”).
B. Motion For Leave To File Amended Complaint Pursuant to Rule 59(e)
The determination of whether a party may amend a judgment or be given leave to
amend a complaint is within the sound discretion of the court.” See Cureton v. Nat’l
Collegiate Athletic Ass’n, 252 F.3d 267, 272 (2001). After a judgment is entered
dismissing a 12(b)(6) motion to dismiss, “a party may seek to amend the complaint (and
thereby disturb the judgment) only through Federal Rules of Civil Procedure 59(e) and
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60(b).” Burtch v. Milberg Factors, Inc., 662 F.3d 212, 230 (3d Cir. 2011) (quoting
Fletcher-Harlee Corp. v. Pote Concrete Contractors, Inc., 482 F.3d 247, 253 (3d Cir.
2007)). Pursuant to Rule 59(e), “[a] motion to alter or amend a judgment must be filed no
later than 28 days after the entry of the judgment.” Id. In this circuit, “where a timely
motion to amend judgment is filed under Rule 59(e), the Rule 15 and 59 inquiries turn on
the same factors.”2 Id. (quoting In re Adams Golf, Inc. Sec. Litig., 381 F.3d 267, 280 (3d
Cir. 2004)).
Those factors include: “undue delay, bad faith, prejudice, or futility.”3 Id. at 23031. Regarding undue delay, the passage of time alone is an insufficient ground to deny
leave to amend. Cureton, 252 F.3d at 273. “[H]owever, at some point, the delay will
become ‘undue,’ placing an unwarranted burden on the court, or will become
‘prejudicial,’ placing an unfair burden on the opposing party.”4 Adams v. Gould Inc., 739
F.2d 858, 868 (3d Cir. 1984). As to the second factor, “prejudice to the non-moving
party is the touchstone for the denial of the amendment.” CMR D.N. Corp. v. City of
Philadelphia, 703 F.3d 612, 629 (3d Cir. 2013) (quoting Dole v. Arco Chem. Co., 921
F.2d 484, 488 (3d Cir. 1990)). Prejudice requires an assessment of “the hardship to the
defendants if the amendment [is] permitted.” Cureton, 252 F.3d at 273. The court should
consider “whether allowing an amendment would [result] in additional discovery, cost,
2
The Third Circuit has adopted “the Fifth Circuit’s understanding of the
relationship between Rules 15(a) and 59(e).” South Jersey Gas Co. v. Mueller Co., Ltd.
Civ. No. 09-4194 (JS), 2011 WL 5873028 (D.N.J. Nov. 18, 2011).
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The District Court should not apply the traditional Rule 59(e) factors on a motion
under Rule 59(e) to amend the complaint. Holland v. Macerich, Civ. No. 09-914 (RMB),
2012 WL 1377359 (D.N.J. Apr. 18, 2012) (citing Burtch, 662, F.3d at 230-31).
4
For example, “[d]elay may become undue when a movant has had previous
opportunities to amend a complaint.” Cureton, 252 F.3d at 273.
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and preparation to defendant against new facts or new theories.” Id. Finally, the futility
factor “means that the complaint, as amended, would fail to state a claim upon which
could be granted.” Great Western Mining & Mineral Co. v. Fox Rothschild LLP, 615
F.3e 159, 175 (3d Cir. 2010) (quoting In re Merck & Co. Sec., Derivatives, & ERISA
Litig., 493 F.3d 393, 400 (3d Cir. 2007)). The “same standard of legal sufficiency” as
applied to Rule 12(b) (6) assesses futility. Id. In that connection, “[t]he District Court
determines futility by taking all pleaded allegations as true and viewing them in a light
most favorable to the plaintiff.” Id. (quoting Winer Family Trust v. Queen, 503 F.3d 319,
330-31) (3d Cir. 2007).
The Court must bear in mind, however, that while the factors are identical in
assessing both Rule 59(e) and Rule 15(a) motions, the liberal standard of Rule 15(a) is
not applicable after the judgment is entered because Rule 59(e) should not be employed
in a manner contrary to “favoring finality of judgments and the expeditious termination
of litigation….” Id. at 231 (quoting Ahmed v. Dragovich, 291 F.3d 201, 208 (3d Cir.
2002)).
DISCUSSION
I. Motion for Reconsideration
Pursuant to L. Civ. R. 7.1(i), Plaintiff argues that the Court’s dismissal of
Plaintiff’s Second Amended Complaint was made in clear error of fact and law, and as a
result, manifest injustice will occur without intervention by the Court. In addition,
Plaintiff argues that it should have been afforded the opportunity to amend its Second
Amended Complaint prior to this Court granting Defendants’ motion to dismiss. In
response, Defendants argue that Plaintiff’s motion for reconsideration must fail as a
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matter of law because Plaintiff merely disagrees with the judgment of this Court.
Defendants further argue that this Court had no obligation to notify Plaintiff of its right to
amend its Second Amended Complaint.
Prior to analyzing the motion for reconsideration, the Court first addresses
Plaintiff’s contention that it should have been afforded the opportunity to amend its
Second Amended Complaint. The Third Circuit has cautioned that when a court permits a
party to amend after an adverse decision against that party on a motion to dismiss, a
threshold determination must be made whether any amendments would be inequitable or
futile. See Phillips v. County of Allegheny, 515 F.3d 224, 245 (3d Cir. 2008). Here, this
Court dismissed Plaintiff’s Second Amended Complaint without providing Plaintiff
another opportunity to amend because Plaintiff had failed to cure its pleading defects
after two unsuccessful attempts. However, as it will be discussed supra, the Court will
consider Plaintiff’s amendments in light of its motion pursuant to Rule 59(e).
As to its motion for reconsideration, Plaintiff has not argued that there has been
an intervening change in the controlling law or that new evidence is available. Instead,
Plaintiff argues that the Court needs to correct a clear error of fact and law in order to
avoid a manifest injustice. In so arguing, however, Plaintiff does not present this Court
with any “dispositive factual matters or controlling decisions of law” that were
overlooked, see D’Argenzio v. Bank of America Corp., 877 F. Supp. 2d 202, 207 (D.N.J.
2012), rather, Plaintiff merely presents new allegations that should have been raised prior
to the Court’s July Decision. CPS MedManagement LLC v. Bergen Regional Medical
Center, L.P., 940 F. Supp. 2d 141, 168 (D.N.J. 2013). In that regard, the Court denies
Plaintiff’s motion for reconsideration.
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II.
Motion for Leave to Amend After the Final Judgment
In the alternative, Plaintiff requests leave to amend the Second Amended
Complaint after a final judgment pursuant to Fed. R. Civ. P. 59(e). Plaintiff argues that it
is able to cure the deficiencies of the Second Amended Complaint by adding more
specificity to seven of its claims against Defendants.
To the contrary, Defendants
maintain that the proposed Third Amended Complaint is also insufficiently pled.
Before I assess the futility of Plaintiff’s new amendments, I find that Plaintiff has
not engaged in undue delay, bad faith, or prejudice, particularly since Defendants have
not objected to Plaintiff’s amendment request on these bases. Thus, my merit analysis of
Plaintiff’s Rule 59(e) motion focuses on the futility of the proposed Third Amended
Complaint, which shall be examined under the “same standard of legal sufficiency” as a
Rule 12(b)(6) motion. See Great Western Mining & Mineral Co. v. Fox Rothschild LLP,
615 F.3d 159, 175 (3d Cir. 2010). Because Plaintiff only moves to amend seven out of
the thirteen counts dismissed previously, I will only focus on those seven counts: (1)
tortious interference with prospective economic advantage, (2) tortious interference with
contractual relations, (3) civil conspiracy to interfere with prospective economic
advantage; (4) civil conspiracy to interfere with contractual relations; (5) unfair
competition, (6) misappropriation of trade secrets, and (7) alter ego. I also note that the
recitations of the legal principles underlying these causes of actions were included in the
July Decision; those principles will be incorporated herein.
The deficiency that was fatal to Plaintiff’s claims in the Second Amended
Complaint is the lack of any allegations of illegal actions on the part of Defendants. In
that regard, the Court held that Plaintiff could not attribute the alleged wrongful acts of
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the Founders – committed before the incorporation of AI and AAC – to the defendant
entities. In the proposed Third Amended Complaint, Plaintiff has injected sufficient
specificity to cure the deficiencies of its earlier complaint.
The proposed Third Amended Complaint alleges, inter alia, that the Founders
conspired and stole Mu Sigma’s confidential materials during their employment at Mu
Sigma for the express purpose of benefitting the defendant entities, i.e., AI and AAC.
See Pl.’s Amend. Compl., ¶ 4. After the formation of AI and AAC, the Founders
transmitted, and Defendants knowingly accepted, the misappropriated trade secrets. See
id. at ¶¶ 11-19. Currently, Defendants allegedly continue to use the misappropriated
information obtained by the Founders. See id. at ¶¶ 27-28, 33, 35.
With respect to Plaintiff’s allegations of current, continuous possession of Mu
Sigma’s misappropriated information, Plaintiff specifically alleges that Abhishek Anand
solicited, among others, a Mu Sigma customer, a global computer software developer, on
behalf of Defendants. Id. at ¶ 33. In an October 2012 email, Anand -- utilizing his
knowledge of the pricing structures of Mu Sigma – allegedly told the customer that AI
could offer better pricing and applications than its current provider, Mu Sigma. Id. In
that connection, Plaintiff accuses Defendants, through Anand, of using misappropriated
information to solicit customers. Id.
As to both claims for tortious interference with contractual relations and
prospective economic advantage, Plaintiff has identified, in its proposed Third Amended
Complaint, certain of Plaintiff’s protected economic clients and interests from whom the
Founders attempted to solicit business by using, for the benefit of the new defendant
entities, “stolen” proprietary information the Founders obtained while they were
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employed by Mu Sigma. As an example, Plaintiff alleges that in October 2012, Anand
intentionally interfered with the business relationship of Plaintiff and a global computer
software developer and other prospective customers. By doing so, Plaintiff alleges that it
lost certain anticipated economic benefits, as well as Plaintiff’s customers. In addition,
Plaintiff claims that Defendants have “actively solicited and employed [Mu Sigma’s]
employees in direct violation of the non-compete and non-solicitation provisions of the
respective employee’s agreements with Mu Sigma without any justification or excuse.”
Pl. Amend. Comp., ¶ 50. I find that in light of those additional allegations, both claims
for tortious interference with prospective economic advantage and contractual relations
are sufficiently pled.
With respect to Plaintiff’s claim for misappropriation of trade secrets, in the July
Decision, the Court found that Plaintiff did not plead facts regarding how Defendants
used the proprietary information to the detriment of Plaintiff. Plaintiff has also cured that
defect in this claim. It is undisputed for the purpose of this motion that the proprietary
information in question constitutes a trade secret. Plaintiff alleges that the Founders
acquired the proprietary information, which was communicated to “Defendants in
violation of their covenants not to disclose, compete, and solicit.” Pl.’s Amend. Compl. ¶
95. Plaintiff alleges that Defendants were aware that the proprietary information was
acquired with knowledge of the employee’s breach of confidence. Indeed, the Founders
were alleged to have acted on behalf of Defendants and therefore, knowledge could be
inferred. Next, Plaintiff alleges – which allegations were not included in its Second
Amended Complaint -- two specific instances of the secret information being used by
Defendants to the detriment of Plaintiff. First, Plaintiff alleges that “Defendants
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convinced a top U.S. wholesale warehouse to discontinue using Mu Sigma’s service and
to use Affine instead.” Pl.’s Amend. Compl. ¶ 98. Second, Plaintiff uses the allegations
surrounding the October 2012 email in which Anand solicited a Mu Sigma customer on
behalf of Defendants. Based on those allegations in the context of misappropriation,
Plaintiff has connected the dots between the actions of the Founders and the actions of
Defendants; that is, Plaintiff has sufficiently pled actions of Defendants using the alleged
misappropriated trade secret to Plaintiff’s detriment. Accordingly, this post judgment
amendment as to this particular claim would not be futile.
Similarly, Plaintiff has sufficiently pled its unfair competition claim. In the July
Decision, the Court found that Plaintiff did not identify any misleading or deceptive
behavior on the part of AI and AAC sufficient to support a claim of unfair competition.
Rather, the Court found that the crux of Plaintiff’s assertions was directed at the conduct
of the Founders -- prior to the formation of the defendant entities. By alleging specific
wrongful acts of Defendants, albeit through the actions of the Founders, Plaintiff has
sufficiently pled that Defendants are utilizing Mu Sigma’s confidential information to
unfairly compete with Plaintiff on behalf of, and with the knowledge of, Defendants.
Accordingly, based on these allegations, Plaintiff sufficiently identifies deceptive and
wrongful business practices on the part of Defendants that would render competition
unfair. This claim may proceed.
To state a claim for civil conspiracy, a plaintiff must allege “a combination of two
or more persons acting in concert to commit an unlawful act, or to commit a lawful act by
unlawful means, the principal element of which is an agreement between the parties to
inflict a wrong against or injury upon another, and an overt act that results in damage.”
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Banco Popular N. Am. v. Gandi, 184 N.J. 161, 177 (2005) (quoting Morgan v. Union
County Bd. of Chosen Freeholders, 268 N.J. Super. 337, 364 (App. Div. 1993)).
However, in New Jersey, it is well settled that a “corporation which acts through
authorized agents and employees… cannot conspire with itself.” Sun Pharm. Indus., Inc.
v. Core Tech Solutions, Inc., A-0646-11T4, 2013 WL 1942619 (N.J. Super. Ct. App. Div.
May 13, 2013) (quoting Tynan v. Gen. Motors Corp., 248 N.J. Super. 654, 668 (App.
Div. 1991), rev’d in part on other grounds, 127 N.J. 269 (1992)); see Johnson v. Baker,
445 F.2d 424, 427 (3d Cir. 1974) (“a corporation cannot conspire with itself anymore
than a private individual can, and it is the general rule that the acts of the agents are the
acts of the corporation.”); see also Sunkett v. Misci, 183 F. Supp. 2d 691, 722 (D.N.J.
2002) (“When the officers of a corporation are acting in their corporate capacity, they
cannot conspire with the corporation alone.”).
In the instant matter, Plaintiff’s Third Amended Complaint alleges that AI and
AAC have conspired with the Founders to interfere with Plaintiff’s prospective economic
advantage and contractual relations. However, as alleged, the wrongful actions of the
Founders are taken in their official capacity on behalf of Defendants. Therefore, the
alleged acts of the Founders in that context cannot form the basis of a civil conspiracy
since a corporation cannot conspire with itself through the conduct of its agents.
Finally, the Court addresses Plaintiff’s inclusion of an alter ego claim. While
there is an open question as to whether alter ego is a distinct recognizable cause of action
or simply a theory of liability, the fatal defect in Plaintiff’s claim is that the alleged alter
ego of the defendant entities (i.e., the Founders) are not within this Court’s jurisdiction,
and therefore, the Founders are not within the purview of this litigation. Indeed, the
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Court has previously found that it lacks personal jurisdiction over the Founders, and so,
even if Plaintiff were successful in piercing the corporate veil, this Court would not have
the requisite personal jurisdiction to enter judgment against the individual officers.
However, if discovery reveals additional facts establishing this Court’s personal
jurisdiction over the Founders, Plaintiff may move to add the Founders and the alter ego
claim at that time.
CONCLUSION
Based on the forgoing, Plaintiff’s motion for reconsideration is DENIED.
Plaintiff’s motion for leave to file a Third Amended Complaint pursuant to Rule 59(e) is
DENIED in part and GRANTED in part as follows: Counts One, Two, Five and Six are
sufficiently pled; Counts Three, Four and Seven are DISMISSED without prejudice.
DATED: March 24, 2014
/s/ Freda L. Wolfson
FREDA L. WOLFSON, U.S.D.J.
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