OnX USA LLC v. Sciacchetano et al

Filing 43

Opinion and Order. Plaintiff OnX USA's Motion for leave to file First Amended Complaint (Related doc # 36 ) is granted. Plaintiff shall file its amended pleading within seven days. Defendants have 21 days after they have been served to plead, move or otherwise respond. Defendant Sciacchetano's Motion to Dismiss; Defendants' Motion to Change/Transfer Venue; and Plaintiff's Motion for Temporary Restraining Order and Preliminary Injunction (Related doc #'s 4 , 5 , and 27 ) are all denied as moot. Judge Christopher A. Boyko on 6/14/2012. (H,CM)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

OnX USA LLC, etc.,
Plaintiff,
vs.
LOUIS SCIACCHETANO, et al.,
Defendants.

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CASE NO. 1:11CV2523
JUDGE CHRISTOPHER A. BOYKO
OPINION AND ORDER

CHRISTOPHER A. BOYKO, J.:
This matter comes before the Court upon the Motion (ECF DKT #36) of Plaintiff,
OnX USA LLC (“OnX”), for Leave to File First Amended Complaint. For the reasons
outlined in this Opinion, the Motion is granted. Plaintiff shall file its amended pleading
within seven days. Defendants have twenty-one days after they have been served within
which to plead, move or otherwise respond.
Defendant Sciacchetano’s Motion (ECF DKT #4) to Dismiss for Lack of Personal
Jurisdiction; Defendants’ Motion (ECF DKT #5) to Change/Transfer Venue; and Plaintiff’s
Motion (ECF DKT #27) for Temporary Restraining Order and Preliminary Injunction are
denied as moot, since all these motions were filed in relation to the original Complaint.

I. INTRODUCTION
The Court scheduled oral arguments on Defendants’ Motions to Dismiss and to
Transfer Venue for May 10, 2012. While preparing for the oral arguments, and after
reviewing all the filed materials, the Court became concerned about Plaintiff’s standing to sue,
and thus, about its own subject matter jurisdiction. Therefore, the Court held a conference on
May 10, 2012 instead, and discussed the troubling issues. In response to the Court’s inquiries
regarding standing and jurisdiction, Plaintiff suggested it could cure any defects by amending
its Complaint. The Court ordered Plaintiff to move for leave to amend, with the proposed
pleading attached as an exhibit, by May 17, 2012. Plaintiff complied in a timely manner, and
the matter has been fully briefed.
II. FACTUAL BACKGROUND
This action originated in Cuyahoga County Common Pleas Court, and was removed,
on the basis of diversity jurisdiction, on November 21, 2011. OnX brought suit against
Sciacchetano and Sirius Computer Solutions, Inc., asserting claims for breach of contract;
tortious interference with contracts/business relationships; misappropriation/conversion of
trade secrets; accounting; unjust enrichment; unfair competition; and civil conspiracy. OnX
also sought injunctive relief to prevent Defendants from soliciting its customers, suppliers and
employees; using its trade secrets to interfere with its business relationships; and engaging in
unfair competition.
OnX further alleged that it is a limited liability company organized and existing under
the laws of the State of Delaware, with its principal place of business in Solon, Ohio.
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Moreover, OnX recited: “OnX was formerly known as Agilysys Technology Solutions
Group, LLC, and was a subsidiary of Agilysys, Inc. OnX is the successor of the Technology
Solutions Group business unit of Agilysys and all of its rights pertinent thereto.” (ECF DKT
#1-1, Complaint at ¶ 1).
In 2004, Sciacchetano was hired by Agilysys, Inc. to work in its Technology Solutions
Group (“TSG”). On July 12, 2004, Sciacchetano signed a Non-Disclosure Policy and
Agreement with Agilysys, Inc. (ECF DKT #1-1, Exhibit to Complaint). This document does
not include a non-compete/non-solicitation clause, nor does it provide that the employee is
obligated to the employer’s successors or assigns.
An Employment Agreement between Sciacchetano and Agilysys, Inc., bearing an
effective date of September 20, 2010, is also attached to the Complaint. Id. The signature and
date blocks are blank; but a page containing a purported photocopy of signatures is affixed to
the end of the document. This agreement contains a non-compete/non-solicitation covenant,
an assignability clause, and an Ohio choice of law provision.
In August of 2011, Sciacchetano’s employment was terminated. On August 23, 2011,
Sciacchetano accepted a position with Sirius.
In its proposed First Amended Complaint, OnX recites that its principal place of
business is Mayfield Heights, Ohio; and alleges: “OnX was formerly known as Agilysys
Technology Solutions Group, LLC (“TSG”), and was a subsidiary of Agilysys, Inc. *** On
August 1, 2011, OnX officially changed its name from TSG to OnX USA LLC, by filing a
Certificate of Amendment with the Delaware Secretary of State. [] OnX is the successor of the
TSG business unit of Agilysys and all of its rights pertinent thereto.” (ECF DKT #36-1, at
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¶ 1).
In its amendment, OnX seeks additionally to allege Sciacchetano’s breach of an
Employment Agreement with Agilysys, Inc., signed and dated June 6, 2006. (ECF DKT #404). This contract includes non-solicitation/non-compete and confidentiality clauses. At ¶ 11,
it states:
This agreement shall inure to the benefit of, and be binding upon and
enforceable by Agilysys, and by its successors and assigns. This agreement
may be assigned by Agilysys, without your consent, to a third party
(“Assignee”) in connection with the sale or transfer of all or substantially all of
Agilysys’ business, or any division or unit thereof, whether by way of sale of
stock, sale of assets, merger or other transaction.
OnX also wishes to amend by adding reference to a Contribution Agreement, effective
April 1, 2010, between Agilysys, Inc. and Agilysys TSG. By signing this agreement,
Agilysys, Inc. (“Parent”) transferred and assigned all of the assets owned and used in
connection with the operation of the IBM/HP units [the division in which Sciacchetano
worked ] to TSG, including all rights and obligations relating to employees, consultants, and
independent contractors dedicated to the IBM/HP business. (ECF DKT #36-2, ¶ 1-H).
OnX’s proposed pleading adds claims for tortious interference with OnX’s noncompetition agreement with Agilysys, Inc., and for violation of the Computer Fraud and
Abuse Act (18 U.S.C. § 1030).
III. LAW AND ANALYSIS
Amending pleadings
Fed.R.Civ.P. 15(a)(2) reads in part: “The court should freely give leave [to amend]
when justice so requires.” However, this liberal amendment policy is not without limits. The

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Sixth Circuit has observed, “A motion to amend a complaint should be denied if the
amendment is brought in bad faith, for dilatory purposes, results in undue delay or prejudice to
the opposing party, or would be futile.” Colvin v. Caruso, 605 F.3d 282, 294 (6th Cir.2010)
(citing Crawford v. Roane, 53 F.3d 750, 753 (6th Cir.1995)). “A proposed amendment is
futile if the amendment could not withstand a Fed.R.Civ.P. 12(b)(6) motion to dismiss.” Rose
v. Hartford Underwriters Ins. Co., 203 F.3d 417, 420 (6th Cir.2000).
Defendants do not argue that Plaintiff brought its motion to amend in an untimely
manner, in bad faith, without notice, or after repeated failures to cure pleading deficiencies. In
fact, the Court, by expressing its concerns to the parties, invited a motion to amend.
Defendants do argue, however, that the proposed First Amended Complaint does not cure the
standing defects and that the amended contract-based claims are futile.
Defendants contend that Sciacchetano and OnX did not have any viable employment
agreements at the time of Sciacchetano’s termination. Defendants also ask the Court to “give
effect to the parties’ intentions.” (ECF DKT #39 at 4-8). In this regard, Defendants refer to
various declarations filed within the parties’ Motion to Dismiss briefing. In addition,
Defendants ask the Court to consider the impact of merger and/or integration clauses, as well
as the absence of explicit assignability provisions.
Unfortunately, the analysis suggested by Defendants requires consideration of matters
outside the pleadings, and draws the Court beyond the bounds of inquiry required by a motion
to amend. Rather, restricting itself to the allegations of the proposed amendment, and
construing those allegations in favor of OnX, the Court determines that OnX has sufficiently
alleged: A 2004 Non-Disclosure Policy and Agreement executed by Sciacchetano with
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Agilysys, Inc.; A 2006 Employment Agreement between Sciacchetano and Agilysys, Inc.,
which inures to the benefit of Agilysys’ successors and assigns; A 2010 Employment
Agreement (with some contract construction issues) between Sciacchetano and Agilysys, Inc.,
which is enforceable by subsidiaries or successors and which is assignable; A 2010
Contribution Agreement, by which Agilysys, Inc. transferred any existing agreements
concerning the IBM/HP division (where Sciacchetano worked) to Agilysys TSG; and the
August 1, 2011 Certificate of Amendment from the Delaware Secretary of State, certifying
that “Agilysys Technology Solutions Group, LLC” [TSG] changed its name to “OnX USA
LLC.”
On its face, the proposed First Amended Complaint is not so inadequate that it fails to
make valid claims, particularly for breach of contract. The amended allegations demonstrate
that Plaintiff OnX USA LLC has standing to sue. The Court’s subject matter jurisdiction
concerns have been satisfied; but this ruling is not to be construed as a determination of any
other legal or factual issues between the parties.
IV. CONCLUSION
Therefore, for these reasons, and pursuant to Fed.R.Civ.P. 15(a), the Motion (ECF
DKT #36) of Plaintiff, OnX USA LLC, for Leave to File First Amended Complaint is
GRANTED. As ordered previously, Plaintiff shall file its First Amended Complaint within
seven days, and Defendants shall plead, move or respond twenty-one days thereafter.
Furthermore, Defendant Sciacchetano’s Motion (ECF DKT #4) to Dismiss for Lack of
Personal Jurisdiction; Defendants’ Motion (ECF DKT #5) to Change/Transfer Venue; and
Plaintiff’s Motion (ECF DKT #27) for Temporary Restraining Order and Preliminary
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Injunction are denied as moot, since all these motions were filed in relation to the original
Complaint.

IT IS SO ORDERED.
s/ Christopher A. Boyko
CHRISTOPHER A. BOYKO
United States District Judge
DATED: June 14, 2012

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