DIVERSANT, LLC v. CARINO

Filing 82

OPINION filed. Signed by Judge Anne E. Thompson on 3/8/2019. (mmh)

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NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

DIVERSANT, LLC,
Plaintiff,

Civ. No. 18-3155

v.
MITCHELLE CARINO,

OPINION

Defendant.

THOMPSON, U.S.D.J.
INTRODUCTION
This matter comes before the Court on a Motion to Dismiss for Mootness brought by
Defendant Mitchelle Carino (“Defendant”). (ECF No. 71.) Plaintiff Diversant, LLC
(“Plaintiff”) opposes. (ECF No. 75.) Plaintiff also filed a Cross Motion for Attorneys’ Fees and
Costs (ECF No. 76), which Defendant opposes (ECF No. 79). The Court has decided the
motions after considering the written submissions without oral argument pursuant to Local Civil
Rule 78.1(b). For the following reasons, the Court denies both Defendant’s Motion to Dismiss
and Plaintiff’s Cross Motion for Attorneys’ Fees and Costs.
BACKGROUND
As the parties are well familiar with the facts of this case, the Court provides a briefer
recitation of the facts than in prior opinions. 1 Plaintiff essentially assists companies in
identifying and recruiting IT consultants and contractors and thus maintains a large database of

1

The Court adopts the fuller factual recitation contained within its Opinion dated September 24,
2018. (See Op. at 1–8, ECF No. 63.)
1

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contacts in order to serve its clients. (Compl. ¶¶ 9, 11, ECF No. 1.) On July 22, 2015, Plaintiff
hired Defendant to assist in providing IT consultants and contractors to Plaintiff’s San Franciscobased clients, which primarily included Wells Fargo. (Def.’s Statement of Undisputed Material
Facts (“SUMF”) ¶¶ 1–2, ECF No. 71-3.) In this role, Defendant had access to Plaintiff’s client
and consultant database. (Compl. ¶ 6.)
In connection with this employment, Plaintiff and Defendant executed an employment
agreement, the “At-Will, Restrictive Covenant and Arbitration Agreement” (the “Agreement”),
wherein the parties agreed to several covenants of import here. (Def.’s SUMF ¶ 3.) First,
Defendant agreed never to use or disclose confidential information and/or trade secrets
(“Confidential Business Information”) such as information regarding consultants or customers
that “is not commonly known by or available to the public.” (Agreement ¶ 2 (the “NonDisclosure Clause”), ECF No. 71-2.) Second, Defendant agreed not to compete with Plaintiff’s
business within a fifty-mile radius of its location for a period of one year following the
termination of his employment. (Id. ¶ 3 (the “Non-Compete Clause”).) Third, also for a period
of one year following the termination of his employment, Defendant agreed not to “solicit or
attempt to solicit any information technology staffing services business” from any of Plaintiff’s
actual or prospective clients. (Id. ¶ 5 (the “Non-Solicitation Clause”).) Finally, Defendant
agreed that any legal claims must be submitted to arbitration, but that Plaintiff, in its sole
discretion, may properly seek “temporary, preliminary and/or final injunctive relief . . . in any
court of competent jurisdiction.” (Id. ¶¶ 19–20.)
On January 3, 2018, Defendant resigned from his employment with Plaintiff and on the
same day began employment with Artech, a San Francisco-based firm that is located within fifty
miles of Plaintiff, services Wells Fargo, and competes with Plaintiff. (See Op. at 5.) Defendant

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also began soliciting and doing business with Wells Fargo immediately upon joining Artech.
(See id.)
On March 5, 2018, Plaintiff filed a Verified Complaint and a Motion for Temporary
Restraining Order, Preliminary Injunction, Expedited Discovery, and Preservation Order.
Plaintiff pleads two counts: (1) breach of contract, contending that Defendant breached, inter
alia, the Non-Compete Clause and the Non-Solicitation Clause (Compl. ¶¶ 59–60); and (2)
injunctive relief, seeking to enjoin Defendant from, among other things, misappropriating
Plaintiff’s Confidential Business Information (id. ¶ 69).
After expedited discovery, the Court held a hearing regarding Plaintiff’s Application for
Preliminary Injunction on June 11, 2018. (ECF No. 41.) On that same day, the Court issued a
Preliminary Injunction (the “Preliminary Injunction”). (ECF No. 40.) The Court enjoined
Defendant until January 3, 2019—one year after Defendant’s separation from Plaintiff—from
misappropriating any of Plaintiff’s Confidential Business Information; providing IT staffing
services to any of Plaintiff’s competitors located within fifty miles of Plaintiff’s San Francisco
office; soliciting any clients for whom he provided services within the last two years on behalf of
Plaintiff, including Wells Fargo; and hiring any of Plaintiff’s consultants. (Id. ¶ 6.)
On July 25, 2018, Plaintiff filed a Motion for Summary Judgment, essentially seeking to
convert the Preliminary Injunction into a permanent one. (ECF No. 43.) On August 21, 2018,
Defendant opposed and requested further discovery pursuant to Rule 56(d) of the Federal Rules
of Civil Procedure. (Def.’s Br. in Opp’n to Pl.’s Mot. for Summ. J. at 21–28, ECF No. 49.)
Defendant also filed a Cross Motion to Dismiss, contending that the Agreement compels
arbitration of any pending issues. (See id. at 18–21.)

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On September 24, 2018, the Court denied both Plaintiff’s Motion for Summary Judgment
and Defendant’s Motion to Dismiss. (See Order at 1, ECF No. 64.) The Court instead granted
Defendant’s request for further discovery pursuant to Rule 56(d). (See id.) The Court also
explained that in regard to the Non-Disclosure Clause, “genuine disputes of material fact exist as
to specifically what information is contained within the database, what information Defendant
misappropriated, and what information is confidential.” (Op. at 16–18.)
On January 11, 2019, while motions to compel additional discovery were still pending
(see ECF Nos. 69–70), Defendant filed the instant Motion to Dismiss. Defendant argues that the
Preliminary Injunction expired on January 3, 2019, so “there is no longer any threat to [Plaintiff]
that [Defendant] will violate the [Agreement]” and thus “the case is deemed moot and . . . must
be dismissed.” (Def.’s Br. at 1, ECF No. 71-1.) On February 4, 2019, Plaintiff opposed,
contending that an open issue remains as to whether Defendant’s cellphone, which Defendant
has turned over to his attorneys, contains Confidential Business Information in violation of the
Non-Disclosure Clause. (See Pl.’s Br. at 7, ECF No. 75.) Plaintiff also filed a Cross Motion for
Attorneys’ Fees and Costs, arguing that the expiration of the Preliminary Injunction entitles it to
fees and costs now. (Id. at 9–14.) Plaintiff requests that Artech be held responsible for these
fees and costs and, if not, requests limited discovery in order to determine Artech’s liability for
these fees and costs. (Id. at 14–17.) On February 25, 2019, Defendant replied in support of its
Motion to Dismiss and opposed Plaintiff’s Cross Motion (ECF No. 79), and on February 28,
2019, Plaintiff replied in support of its Cross Motion (ECF No. 80-1). 2 Both motions are
currently before the Court.

2

Additionally, on March 1, 2019, Defendant filed a letter requesting that the Court disregard
Plaintiff’s reply brief, contending that the local rules prohibited Plaintiff from doing so. (ECF
No. 81.)
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LEGAL STANDARD
“Dismissal pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure is
appropriate when the District Court lacks jurisdiction over the subject matter of the case.”
Goodman v. People’s Bank, 209 F. App’x 111, 113 (3d Cir. 2006). To remain within the
jurisdictional purview of the court, an actual case or controversy must exist “at all stages of
review, not merely at the time the complaint is filed.” Genesis Healthcare Corp. v. Symczyk, 569
U.S. 66, 71 (2013). The constitutional “case-or-controversy requirement . . . limits the business
of federal courts to questions presented in an adversary context and in a form historically viewed
as capable of resolution through the judicial process.” Ordonez-Tevalan v. AG of the U.S., 837
F.3d 331, 339 (3d Cir. 2016) (quoting Thomas v. AG of the U.S., 625 F.3d 134, 139–40 (3d Cir.
2010)).
Mootness arises where “changes in circumstances that prevailed at the beginning of the
litigation have forestalled any occasion for meaningful relief.” Ordonez-Tevalan, 837 F.3d at
339–40. For example, “an offer for the entirety of a plaintiff’s claim will generally moot the
claim.” Goodman, 209 F. App’x at 113 (quoting Weiss v. Regal Collections, 385 F.3d 337, 342
(3d Cir. 2004)). Where a plaintiff can no longer “demonstrate that he possesses a legally
cognizable, or ‘personal stake,’ in the outcome of the action. . . . the action can no longer proceed
and must be dismissed as moot.” Genesis Healthcare, 569 U.S. at 71–72. Because mootness
necessarily means no continuing case or controversy exists between the parties, its finding
removes the case from the subject matter jurisdiction of the court.

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DISCUSSION
I.

Motion to Dismiss
Defendant moves to dismiss exclusively on the basis that the Preliminary Injunction

expired on January 3, 2019. (See Def.’s Br. at 6–12.) Defendant focuses much of his attention
on the Non-Compete Clause and the Non-Solicitation Clause, each of which was enforceable—
pursuant to both the Agreement and the Preliminary Injunction—for just one year. (See id. at 7–
10.) Defendant argues that “[b]ecause the Agreement expired, [Defendant] is free to compete
against [Plaintiff] if he so chooses. . . . [T]here is no risk of [Defendant] violating the Agreement,
and thus, there is no harm left to enjoin.” (Id. at 6.) Defendant is correct only insofar as the
dispute regarding these two covenants is now moot. 3
Defendant also addresses at the end of its Brief another argument “in the event that
[Plaintiff] argues its claims are not moot because it may seek a permanent injunction enjoining
[Defendant] from using, disclosing, or misappropriating [Confidential Business Information].”
(Def.’s Br. at 10–11 (emphasis added).) The Court is surprised, however, that Defendant treats
this argument as such a conjectural possibility. The Preliminary Injunction specifically enjoined
Defendant from misappropriating any of Plaintiff’s Confidential Business Information. (Prelim.
Inj. ¶ 6.) Plaintiff then sought a permanent injunction, specifically expressing concern in regard
to its Confidential Business Information. (See Pl.’s Mem. in Supp. of Mot. for Summ. J. at 1–4,
8, 11, ECF No. 43-5.) And just a few months ago, the Court denied Plaintiff’s Motion for
Summary Judgment and granted Defendant’s request for further discovery predicated on the fact

3

Plaintiff concedes this notion. (See Pl.’s Br. at 7 (explaining that if the only further relief
Plaintiff were seeking is enforcement of the Non-Compete and Non-Solicitation clauses, “then
[Defendant] is likely correct that when the [P]reliminary [I]njunction expired on January 3, 2019,
this case would arguably be moot”).)
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that, inter alia, “genuine disputes of material fact exist as to specifically what information is
contained within the database, what information Defendant misappropriated, and what
information is confidential.” (Op. at 18.) The parties have vigorously contested every phase of
this litigation, so it should be obvious to all by now that Plaintiff is seeking to enjoin Defendant
from using or disclosing its Confidential Business Information and that Defendant’s entitlement
to the Confidential Business Information is a salient, open question.
Although Defendant attempts to persuade that he “does not have access to [the
Confidential Business Information] . . . [so] there is no threat of [Defendant] using or
misappropriating it” (Def.’s Br. at 12), Defendant acknowledges that the information Plaintiff
seeks to protect is on Defendant’s cellphone that he merely delivered to his attorneys (id. at 11).
This circumstance is not a permanent solution. Without a Court order, nothing is stopping
Defendant from resuming possession of the cellphone and accessing what Plaintiff alleges is
confidential and thus protected information.
Defendant wishes to dismiss this action, but dismissal would require the Court to make
factual findings in regard to the very subject on which the Court ordered further discovery.
Because Plaintiff seeks to permanently enjoin Defendant from accessing, using, or disclosing its
Confidential Business Information, this action is not moot, and Defendant’s Motion must be
denied.
II.

Cross Motion for Attorneys’ Fees
Plaintiff argues that it is entitled to recover attorneys’ fees now that the Preliminary

Injunction has expired. (See Pl.’s Br. at 9–14.) Implicit in Plaintiff’s request is the belief that
this Court even has jurisdiction to decide such a question. This belief is not a foregone

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conclusion, however, because Defendant insists that, pursuant to the Agreement, any request for
attorneys’ fees must be presented to an arbitrator. (Def.’s Reply at 6–9.)
As a threshold matter, this Court indeed retains jurisdiction to decide the question of
whether the Agreement compels the parties to dispute attorneys’ fees in arbitration. 4 The
Agreement unequivocally delegates the question of arbitrability to this Court: “Any issues about
whether a dispute constitutes a Legal Dispute subject to arbitration will be determined by a court
of competent jurisdiction and not by an arbitrator.” (Agreement ¶ 19.) Therefore, this Court has
jurisdiction to decide whether the parties must submit any requests for attorneys’ fees to
arbitration.
Moving on to the merits of the question now, the Court finds that Plaintiff must submit its
request for attorneys’ fees to arbitration, rather than litigate it in this Court. Paragraph 17 of the
Agreement contains the provision regarding attorneys’ fees and costs: “In any suit or other
proceeding to determine, confirm, or enforce any rights of obligations under this Agreement, the
prevailing party shall be entitled to an award of its reasonable attorneys’ fees, expert witness fees
and all costs and expenses of litigation and appeal.” Paragraph 19 then establishes a default rule

4

“[P]arties may agree to have an arbitrator decide not only the merits of a particular dispute but
also ‘gateway’ questions of ‘arbitrability,’ such as whether the parties have agreed to arbitrate or
whether their agreement covers a particular controversy.” Henry Schein, Inc. v. Archer & White
Sales, Inc., 139 S. Ct. 524, 529 (2019); see also Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63,
70 (2010) (noting that “[a]n agreement to arbitrate a gateway issue is simply an additional,
antecedent agreement”). The Supreme Court has recently held that “[w]hen the parties’ contract
delegates the arbitrability question to an arbitrator, the courts must respect the parties’ decision
as embodied in the contract.” Henry Schein, 139 S. Ct. at 531. But it also cautioned that “courts
‘should not assume that the parties agreed to arbitrate arbitrability unless there is clear and
unmistakable evidence that they did so.’” Id. (quoting First Options of Chi., Inc. v. Kaplan, 514
U.S. 938, 944 (1995)); see also Moon v. Breathless Inc., 868 F.3d 209, 213 (3d Cir. 2017)
(“Under New Jersey law, ‘the law presumes that a court, not an arbitrator, decides any issue
concerning arbitrability.’” (quoting Morgan v. Sanford Brown Inst., 137 A.3d 1168, 1177 (N.J.
2016))).
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requiring arbitration for “enforcement of any provision . . . or any other dispute between
[Defendant] and [Plaintiff].” (Agreement ¶ 19.) This blanket provision allows for exceptions,
but only “as explicitly provided” within the Agreement. (Id. (emphasis added).) As explained in
the Court’s Opinion on September 24, 2018, injunctive relief in a court of competent jurisdiction
is one such exception. (Op. at 9–12; Agreement ¶ 20 (carving out injunctive relief from
arbitration requirement).) Compared to the explicit language in Paragraph ¶ 20 exempting
injunctive relief—“[n]otwithstanding the Parties’ agreement to submit all Legal Disputes to final
and binding arbitration as set forth in Paragraph 19, [Plaintiff] may . . . seek . . . injunctive
relief”—Paragraph 17 does not contemplate or even mention its exclusion from mandatory
arbitration. Interpreting Paragraphs 17 and 20 both as exceptions despite their diverging
language would be discordant; such an interpretation would lack pragmatism and harmony
within the Agreement.
One may contend that the words “[i]n any suit or other proceeding” envision a request for
attorneys’ fees in a court, but a waiver of arbitration must not require semantic contortions; “[a]n
order to arbitrate the particular grievance should not be denied unless it may be said with positive
assurance that the arbitration clause is not susceptible of an interpretation that covers the
asserted dispute,” Trippe Mfg. Co. v. Niles Audio Corp., 401 F.3d 529, 532 (3d Cir. 2005)
(emphasis added) (quoting AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 650
(1986)). Indeed, a presumption of arbitrability applies where “an arbitration agreement is
ambiguous about whether it covers the dispute at hand. Otherwise, the plain language of the
contract holds.” White v. Sunoco, Inc., 870 F.3d 257, 262 (3d Cir. 2017); see also Quilloin v.
Tenet HealthSystem Phila., Inc., 673 F.3d 221, 231 (3d Cir. 2012) (finding that “the arbitration
agreement is ambiguous regarding the award of attorneys’ fees . . . [and] that the District Court

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erred in determining that it could not compel arbitration before resolving the issue” (citing
PacifiCare Health Sys., Inc. v. Book, 538 U.S. 401, 406–07 (2003))). Because any arbitrable
exception must be “explicitly provided” within the Agreement and no explicit instruction
exempting attorneys’ fees exists within Paragraph 17 of the Agreement, Plaintiff must submit its
request for attorneys’ fees to an arbitrator.
CONCLUSION
For the reasons stated herein, Defendant’s Motion to Dismiss is denied, and Plaintiff’s
Cross Motion for Attorneys’ Fees and Costs is denied. An appropriate order will follow.

Date: 03/08/2019

_/s/ Anne E. Thompson_______
ANNE E. THOMPSON, U.S.D.J.

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