Extra Mile Transportation, LLC v. Diffey et al
Filing
83
DECISION AND ORDER DENYING Defendants' 24 Motion to Compel Arbitration or Stay Litigation; DENYING Defendants' 29 Motion to Dismiss USLC for Lack of Subject Matter Jurisdiction. Signed by William M. Skretny, Chief Judge U.S.D.C. on 12/12/2011. (MEAL)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
EXTRA MILE TRANSPORTATION, LLC,
Plaintiff,
v.
DECISION AND ORDER
10-CV-424S
DONALD W. DIFFEY and
USLC TRANSPORTATION,
Defendants.
I. INTRODUCTION
In this diversity action, Plaintiff, Extra Mile Transportation, LLC (“Extra Mile”) alleges
that its former employee, Donald Diffey, and the business that he owns, USLC
Transportation (“USLC”), are liable for breaches of contract and loyalty, misappropriation
of trade secrets, and usurpation of corporate opportunity. Presently before this Court are
Defendants’ motions to compel arbitration (Docket No. 24) and to dismiss USLC from this
suit for lack of personal jurisdiction (Docket No. 29). For the following reasons, both
motions are denied.
II. BACKGROUND
A.
Facts
Extra Mile, a freight brokerage business, located in Buffalo, New York, assists
manufacturers and distributors (i.e. businesses that need to transport products) in locating
trucking companies who can ship their goods. (Id. ¶ 10.) For this service it earns a fee. (Id.)
From 2003 to 2010, Diffey worked as a branch manager at Extra Mile’s Houston
office. (Id. ¶ 18.) Extra Mile alleges that throughout the year 2009, Diffey took the
necessary steps to begin his own freight brokerage company, which he named USLC, and
that thereafter, he began to transfer Extra Mile customers away from Extra Mile and to
USLC. (Id. ¶¶ 27-35.) Among these customers was GAF Materials Corporation (“GAF”),
a major Extra Mile client. (Id. ¶¶ 23, 26.)
Extra Mile alleges that at the same time Diffey was displacing its customers, the
Houston office saw a significant decrease in revenue. (Id. ¶ 34.) This prompted Diffey to
downsize the office’s staff. (Id.) Some of those staff members, Extra Mile alleges, began
to work for USLC instead. (Id. ¶ 35.) Extra Mile believes that this conduct violated Diffey’s
employment contract, which prohibited him from, inter alia, competing with Extra Mile for
one year after leaving the company and using certain proprietary and confidential
information for his gain. (Id. ¶ 41-42.)
B.
Procedural History
Extra Mile commenced this suit on May 19, 2010 by filing a complaint in this Court.
(Docket No. 1.) On the same day, Extra Mile moved for a preliminary injunction, which
Diffey opposed. Defendants then moved to compel arbitration, citing the employment
contract in support. (Docket No. 24.) The parties eventually stipulated to an Order imposing
a mutually agreeable injunction. It was signed by District Judge Richard Arcara on June 1,
2010. (Docket No. 28.) Subsequently, on June 11, 2010, Defendants moved for USLC’s
dismissal for lack of subject matter jurisdiction. Six months later, Extra Mile moved to
compel discovery seeking various documents and authorizations. (Docket No. 72.) Each
side has filed a memorandum of law regarding the discovery dispute (Docket Nos. 81, 82),
which is to be decided by Magistrate Judge Schroeder.
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III. DISCUSSION
A.
Arbitration
On January 15, 2004 Diffey signed an employment contract, the “Extra Mile
Transportation, LLC, Associate Agreement (“Agreement”), which was drafted by Extra Mile
(Agreement; Docket No. 1.)1 Although the type of dispute at issue here is excluded from
arbitration under the Agreement, Defendants claim that the Agreement is ambiguous and
that it should be construed against Extra Mile.
1.
Standard for Ambiguity
“It is well settled that a contract is unambiguous if the language it uses has a definite
and precise meaning, as to which there is no reasonable basis for a difference of opinion.”
Lockheed Martin Corp. v. Retail Holdings, N.V., 639 F.3d 63, 69 (2d Cir. 2011). When
determining whether a contract is ambiguous, it is important for the court to read the
integrated agreement “as a whole.” Id. (quoting Law Debenture Trust Co. of N.Y. v.
Maverick Tube Corp., 595 F.3d 458, 468 (2d Cir. 2010) (internal quotation marks omitted)).
If the document as a whole “makes clear the parties' over-all intention, courts examining
isolated provisions should then choose that construction which will carry out the plain
purpose and object of the [agreement].” Id. (quoting Kass v. Kass, 673 N.Y.S.2d 350, 696
N.E.2d 174, 673 N.Y.S.2d 350 (1998) (internal quotation marks omitted; brackets in
original).
1
“Paragraph 7", at issue here, is attached to this Decision as “Appendix A.”
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2.
The Agreement
Under the heading “EMPLOYMENT DISPUTES”, the agreement binds each party
to settle certain disputes in arbitration. In relevant part, it reads: “In consideration of (and
as a material condition of) my hiring or the continuation of my employment as of the date
of this Agreement, Extra [Mile] and [Diffey] agree to submit to arbitration any employment
disputes or issues.” (Id. ¶ 7) (parenthetical in original).
However, immediately following that language, the Agreement defines and limits the
term “employment disputes.” It specifically excludes from the definition “any claim, which
relates to Extra [Mile’s] enforcement of confidentiality or non-competition agreements
(including the ones contained in this Agreement) for which Extra [Mile] expressly reserves,
its right to seek enforcement through Court proceedings and obtain injunctive relief as
appropriate.” (Id.) (parenthetical in original).
There is no dispute that Extra Mile’s claims concern the confidentiality and noncompetition clauses found in the Agreement. Rather, Defendants contend that the
language of the Agreement is ambiguous and should therefore be construed broadly and
against Extra Mile, compelling it to pursue its claims through arbitration. Producing the
ambiguity, Defendants argue, is the contrast between the first section of “Paragraph 7" of
the Agreement, which instructs that all “employment disputes” must be arbitrated, and the
second section of “Paragraph 7", which excludes certain claims.
This Court, however, finds the language of the Agreement to be unmistakably clear.
First, the Agreement indicates that employment disputes must be arbitrated. Next, it
defines “employment disputes” and, in so doing, it unequivocally excludes disputes that
implicate the non-compete and confidentiality clauses. Although the Agreement initially
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refers to employment disputes as “all issues which relate to or arise out of [the]
employment relationship,” is it evident that the succeeding language limits its scope.
Further, reaching any other result would render the limiting section of the Agreement
meaningless, which is contrary to standard contract interpretation. See, e.g., Commc’ns
Workers of Am. v. New York Tel. Co., 327 F.2d 94 (2d Cir. 1964). Accordingly, reading the
document as whole, as this Court must, it is clear that the parties did not intend this claim
to be subject to arbitration; as such Defendants’ motion is denied.2,3 See Lockheed Martin,
639 F.3d at 69.
B.
Motion to Dismiss
Defendants argue that this Court lacks personal jurisdiction over Defendant USLC.4
1.
Rule 12(b)(2) Standard
On a motion to dismiss pursuant to Rule 12(b)(2) of the Federal Rules of Civil
Procedure, the plaintiff bears the burden of establishing that a court has personal
jurisdiction over the defendant. Robinson v. Overseas Military Sales Corp., 21 F.3d 502,
507 (2d Cir. 1994). Where a court declines to conduct an evidentiary hearing on such
motion, a plaintiff need make only a prima facie showing of personal jurisdiction through
2
Defendants’ alternative argum ent, articulated in their supplem ental m em orandum of law (Docket No.
31) posits that the stipulated prelim inary injunction (“Injunction”) supercedes the Agreem ent and renders all
obligations and rights found therein m oot. However, this contention is belied by “Paragraph J” of the Injunction,
which explicitly preserves Extra Mile’s claim s for dam ages arising out of Defendants’ past breaches of the
Agreem ent. (See Docket No. 28.)
3
Defendants note that Texas law m ay apply, but his result is the sam e under Texas law. See Matador
Petroleum Corp. v. St. Paul Surplus Lines Ins. Co., 174 F.3d 653, 656-57 (5th Cir. 1999) (“W hen interpreting
a contract, our prim ary concern is to ascertain and to give effect to the intentions of the parties as expressed
in the instrum ent . . . [t]he contract m ust be considered as a whole . . . [and] each part of the contract should
be given effect.”) (internal quotation m arks and citations om itted).
4
Defendants do not m ake a parallel argum ent with respect to Diffey.
5
affidavits and supporting materials. Bank Brussels Lambert v. Fiddler Gonzalez &
Rodriquez, 171 F.3d 779, 784 (2d Cir. 1999) (citing Marine Midland Bank v. Miller, 664
F.2d 899, 904 (2d Cir. 1981)). Ultimately, “the plaintiff’s prima facie showing, necessary to
defeat a jurisdiction testing motion, must include an averment of facts that, if credited by
the ultimate trier of fact, would suffice to establish jurisdiction over the defendant.” Metro.
Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996). Where the issue
of personal jurisdiction is resolved on affidavits, the allegations are construed in the light
most favorable to plaintiff, and all doubts are resolved in plaintiff’s favor. A.I. Trade
Finance, Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993).
2.
Personal Jurisdiction, USLC
Defendants contend that Extra Mile has failed to satisfy its burden. Referencing only
its Complaint, Defendants point out that Extra Mile did not allege in that document any
facts that would confer jurisdiction on this Court under New York law.5 However, John L.
Sinatra, by declaration dated June 22, 2010, cites documents obtained through subpoena
demonstrating that USLC brokered approximately 333 shipments to locations within New
York State from June 1, 2009 to June 2, 2010. (Sinatra Declaration, ¶ 6-7; Docket No. 352). This is a prima facie showing that defeats Defendants’ jurisdiction testing motion. See
New York Civil Procedure Law and Rules § 302(a)(1) (courts may exercise jurisdiction over
any non-domiciliary defendant that transacts any business within the state or contracts
anywhere to supply goods or services in the state); see also Metro. Life Ins., 84 F.3d at
567. Further, because USLC “purposefully availed itself of the privilege of conducting
5
It is undisputed that New York law applies to this Court’s determ ination of Defendants’ Rule 12(b)(2)
m otion.
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activities” within New York, Extra Mile’s averment of facts suffices to establish jurisdiction
over Defendants under constitutional due process requirements. See World-Wide
Volkswagen Corp. v Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 62 L. Ed. 2d 490
(1980). Accordingly, Defendants’ motion is denied.
IV. CONCLUSION
For the reasons discussed above, Defendants’ motions are denied.
V. ORDERS
IT HEREBY IS ORDERED, that Defendants’ Motion to Compel Arbitration or to Stay
Litigation (Docket No. 24) is DENIED.
FURTHER, that Defendants’ Motion to Dismiss USLC for Lack of Subject Matter
Jurisidiction (Docket No. 29) is DENIED.
Dated:
December 12, 2011
Buffalo, New York
/s/William M. Skretny
WILLIAM M. SKRETNY
Chief Judge
United States District Court
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Appendix A
EMPLOYMENT DISPUTES
7.
In consideration of (and as a material condition of) my hiring or the continuation of
my employment as of the date of this Agreement, Extra and I agree to submit to arbitration
any employment disputes or issues. Such arbitration shall be final and binding arbitration
conducted pursuant to the American Arbitration Association's Rules and
Procedures-Commercial Panel of Arbitrators (as may be changed from time to time, the
most current copy of which is available in the Legal Department). Extra agrees to pay the
fees charged for the arbitration process. If I desire to hire an attorney, or other
representative, to represent me at the arbitration, this will be at my
own expense.
The term "employment dispute" as used in this Agreement means all issues which
relate to or arise out of my employment relationship with Extra. This includes, without
limitation, contractual, statutory and common law claims including, any and all claims for
employment discrimination or sexual harassment under federal and state statutes. The
term "employment disputes" does not include claims for workers' compensation, unfair
labor practices under the National Labor Relations Act and claims for unemployment
insurance or other claims expressly excluded by law. This also excludes any claim, which
relates to Extra's enforcement of confidentiality or non-competition agreements (including
the ones contained in this Agreement) for which Extra expressly reserves, its right to seek
enforcement through Court proceedings and obtain injunctive relief as appropriate.
Extra and I further agree that arbitration is the exclusive means of resolution of such
employment disputes and/or related company claims and that both Extra and the Associate
hereby waive their respective rights, if any, to resolve any dispute and/or related claims
through any other means, except as expressly provided herein, and that resolution of the
dispute as provided herein, by arbitration is final and binding on the parties to the fullest
extent permitted by law. The Associate must initiate arbitration (by submission of a letter
to Extra's General Counselor Vice President, Human Resources requesting arbitration and
referencing the specific dispute(s) being raised) within 300 Days after the alleged dispute
arises or the circumstances giving rise to the dispute arise. The failure of the Associate or
Extra to initiate arbitration within 300 days or to raise any issue in the
letter requesting arbitration shall be deemed a waiver and release of the dispute that is not
raised within the 300 day period, unless the right to pursue a statutory remedy or claim is
preserved by law.
(Agreement, ¶ 7; Docket No. 1.)
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