RADIAN GROUP INC. et al v. BOLEN et al
Filing
54
MEMORANDUM AND/OR OPINION (OPINION ORDER ECF #52). SIGNED BY HONORABLE ANITA B. BRODY ON 5/2/2014. 5/2/2014 ENTERED AND COPIES VIA ECF.(mo, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
RADIAN GUARANTY INC.,
Plaintiff,
v.
RHIANNON BOLEN, et al.,
Defendants.
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CIVIL ACTION
No. 13-6197
May 2, 2014
Anita B. Brody, J.
MEMORANDUM
Plaintiff Radian Guaranty Inc. (“Radian”) brings suit against Defendants Rhiannon Bolen
(“Bolen”), Arch Capital Group Ltd. (“Arch Group”), Arch Capital Group US Inc. (“Arch Group
US”), Arch U.S. MI Services Inc. (“Arch MI Services”) and Arch U.S. MI Holdings Inc. (“Arch
MI Holdings”) (collectively, the “Arch Defendants,” and, collectively with Bolen,
“Defendants”). Radian alleges that Bolen, its former employee, violated a non-competition
agreement with Radian and misappropriated Radian’s trade secrets and confidential information
when she left Radian to work for the Arch Defendants. Radian also alleges that the Arch
Defendants knowingly induced Bolen to join them in violation of her non-competition agreement
and with the express intent of benefiting from her knowledge of Radian’s trade secrets and
confidential information. I exercise subject matter jurisdiction over Radian’s claims pursuant to
28 U.S.C. § 1332.
Currently before me is the Arch Defendants’ motion to dismiss or transfer the suit. The
Arch Defendants move for a dismissal of the suit for failure to join an indispensible party under
Federal Rule of Civil Procedure 19. The Arch Defendants also move for dismissal of the claims
against them on the ground that this Court lacks personal jurisdiction over the Arch Defendants.
1
In the alternative, pursuant to 28 U.S.C. § 1404(a), the Arch Defendants move for an order
transferring the action to the Eastern District of Texas. Finally, the Arch Defendants request an
award of the costs and attorney’s fees incurred to prepare and file their motion. Bolen joins the
Arch Defendants’ motion seeking dismissal for failure to join an indispensible party and seeking
transfer of the action to the Eastern District of Texas. For the reasons discussed below, I will
deny in part and grant in part the Arch Defendants’ motion.
I.
BACKGROUND
A. Factual Background1
Radian provides private mortgage insurance and related risk management products and
services to mortgage lenders across the United States. Beginning in January 2012, Bolen served
as a regional account manager in Radian’s Southern Division. During her eighteen-month tenure
in that role, she managed and supported Radian’s relationships with key regional mortgage
lenders at the corporate level.
On or about September 21, 2012, Bolen entered into a Restricted Stock Unit Grant (the
“Stock Grant Agreement”) with Radian’s parent company, Radian Group Inc. (“Radian Group”).
In consideration for a grant of restricted stock, Bolen agreed not to compete against Radian for a
one-year period following any separation from Radian. In the Stock Grant Agreement, Bolen
acknowledged that she had been and would be exposed to Radian’s trade secrets and confidential
information in the course of the performance of her job duties. She also agreed that she was
prohibited from disclosing or using this information for any purpose other than for the benefit of
Radian.
The Stock Grant Agreement contains a forum selection clause that states:
1
All facts are taken from the Amended Complaint unless otherwise indicated.
2
“The Grantee irrevocably and unconditionally (i) agrees that any legal proceeding
arising out of this paragraph may be brought in the United States District Court
for the Eastern District of Pennsylvania, or if such court does not have jurisdiction
or will not accept jurisdiction, in any court of general jurisdiction in Philadelphia
County, Pennsylvania, (ii) consents to the non-exclusive jurisdiction of such court
in any such proceeding, and (iii) waives any objection to the laying of venue of
any such proceeding in any such court.”
Restricted Stock Unit Grant, Compl. Ex. B. at 7 (§8(f)).
On August 27, 2013, Bolen informed Radian that she was resigning her position with the
company, effective September 10, 2013. Just prior to announcing her resignation, Bolen emailed
some of Radian’s confidential customer information to her personal email account. On or about
September 25, 2013, Radian learned that Bolen had been hired as a Regional Vice President by
the Arch Defendants. Global providers of insurance and reinsurance products, the Arch
Defendants have recently entered the U.S. mortgage insurance marketplace through several
acquisitions. In particular, in February 2013, the Arch Defendants announced their acquisition of
the assets of CMG Mortgage Insurance Co. and PMI, both mortgage insurance companies, as
well as their intention to commence U.S. operations in direct competition with Radian within
twelve months. In July 2013, when the Arch Defendants approached and interviewed Bolen,
they were aware that Bolen was a Radian employee with intimate knowledge of Radian’s trade
secrets and confidential information. The Arch Defendants also knew that employing Bolen
would violate the terms of the Stock Grant Agreement and nonetheless pursued Bolen and
induced her to engage in actions that breached her non-competition agreement and
confidentiality obligations. Since joining the Arch Defendants, Bolen has approached Radian’s
customers and attempted to solicit business from those customers for herself and the Arch
Defendants.
3
B. Procedural Background
On October 23, 2013, Radian and Radian Group filed suit against the Arch Defendants
and Bolen. On November 6, 2013, after being advised that the suit was not subject to federal
diversity jurisdiction because Radian Group and three of the Arch Defendants were citizens of
Delaware, Radian filed an Amended Complaint that eliminated Radian Group as a plaintiff in
order to establish complete diversity.
On November 13, 2013, the Arch Defendants filed their motion to dismiss or transfer the
suit to the Eastern District of Texas. On January 23, 2014, I granted Radian’s motion for
expedited limited jurisdictional discovery on the personal jurisdiction issue. On February 25,
2014, I granted the Arch Defendants’ motion for expedited discovery in support of their motion
to dismiss for failure to join an indispensible party. The motion to dismiss has now been fully
briefed.
II.
FAILURE TO JOIN AN INDISPENSIBLE PARTY
The Arch Defendants, joined by Bolen, contend that the Amended Complaint should be
dismissed under Federal Rule of Civil Procedure 19 because Radian Group is a necessary and
indispensable party to this action that cannot be joined without destroying the basis for this
Court’s subject matter jurisdiction over the suit.
A. Legal Standard
A Rule 19 challenge requires a multi-step analysis. First, the court must determine
whether a party is necessary under Rule 19(a). If the party is necessary and can be joined to the
action, the court must order as such. If the party is necessary but joinder is impeded by
jurisdictional or other considerations, then the court must determine whether the party is
indispensable under Rule 19(b) or whether the action can proceed in the party’s absence.
4
However, if the party is not necessary under Rule 19(a), then the action can proceed in its
absence, and no further analysis is required. Accordingly, whether the party is necessary is the
threshold question. Id.
Rule 19(a) requires the joinder of a party who is subject to service of process and within
the court’s subject matter jurisdiction when:
(1) in the person’s absence complete relief cannot be accorded among those
already parties, or
(2) the person claims an interest relating to the subject of the action and is so
situated that the disposition of the action in the person's absence may
(i) as a practical matter impair or impede that person’s ability to protect
that interest or
(ii) leave any of the persons already parties subject to a substantial risk of
incurring double, multiple, or otherwise inconsistent obligations by reason
of the claimed interest.
Fed. R. Civ. P. 19(a)(1) & (2). Because Radian Group is not a necessary party under
Rule 19(a), I will not discuss Rule 19(b).
B. Discussion
The Arch Defendants and Bolen present three arguments for why Radian Group is a
necessary party. First, under Rule 19(a)(1), the Arch Defendants and Bolen argue that the parties
will be unable to obtain complete relief in Radian Group’s absence. Completeness is determined
on the basis of those persons who are already parties, and not as between a party and the absent
person whose joinder is sought. See Sindia Expedition, Inc. v. Wrecked & Abandoned Vessel,
Known as The Sindia, 895 F.2d 116, 121 (3d Cir. 1990). Neither Radian nor the Arch
Defendants and Bolen would receive incomplete relief without Radian Group in the suit. Radian
is capable of achieving a complete determination on Bolen’s breach of the Stock Grant
Agreement or her confidentiality obligations and the Arch Defendants’ tortious interference with
any contractual relations. Likewise, the Arch Defendants and Bolen could receive a complete
5
determination absolving them of any liability to Radian. If the Arch Defendants and Bolen are
successful, the possibility that they might have to defend against a subsequent suit by Radian
Group does not make Radian Group a necessary party to the action. See Field v.
Volkswagenwerk AG, 626 F.2d 293, 302 (3d Cir. 1980) (“[T]he fact that want of estoppel may
leave a defendant who has defended successfully against one of the injured parties with the risk
that he will be liable to another in a subsequent suit does not make it necessary that all of the
punitive plaintiffs [ ] be joined in the same suit . . . .”). Therefore, none of the existing parties to
the suit would be deprived of complete relief in Radian Group’s absence.
Next, under Rule 19(a)(2)(i), the Arch Defendants and Bolen argue that Radian Group
has a clear interest in the subject of this action. Under this prong of the test, the court evaluates
whether disposition of the action without the absent party will “as a practical matter impair or
impede” the party’s ability to protect its interest in the litigation. “[I]t must be shown that some
outcome of the federal case that is reasonably likely can preclude the absent party with respect to
an issue material to the absent party’s rights or duties under standard principles governing the
effect of prior judgments.” Janney Montgomery Scott, Inc. v. Shepard Niles, Inc., 11 F.3d 399,
407 (3d Cir. 1993). Under Pennsylvania law, a party may be precluded from relitigating an issue
if the issues are identical, the parties are in privity, and the party against whom preclusion is
asserted had a full and fair opportunity to litigate the issue in a prior action. Sanders v. Sanders,
558 A.2d 556, 560 (Pa. Super. Ct. 1989). Because Radian Group would not have a full and fair
opportunity to litigate the issues present in this case if it were not joined, Pennsylvania law
would accord no preclusive effect to this Court’s judgment. As such, Radian Group’s absence
would not, as a practical matter, impair its interest. Moreover, as the Third Circuit found in
Sinda, “Subdivision (a)(2)(i) of Rule 19 clearly does not apply to this case because [the absent
6
party] may always protect its interest . . . by voluntarily appearing and asserting its rights.” 895
F.2d at 122. To the contrary, in this case, Radian Group has removed itself voluntarily from the
litigation and filed an affidavit implying that Radian can sufficiently represent its interests in this
case. See Browne Aff. ¶¶ 1-5, ECF No. 33-1 (agreeing to be bound by and agreeing not to
challenge the outcome of this case); see also Kessler v. Pollick, 851 F. Supp. 687, 691 (E.D. Pa.
1994) (“It is appropriate, in considering a motion under Rule 19, to ask the absent party herself
whether she believes that her interests would be jeopardized in the absence of joinder. While that
person’s response is not dispositive of the issue, it may provide a helpful counterbalance to the
moving party’s assertions.”) Thus, the disposition of this action without Radian Group will not
impair its ability to protect its interest in this litigation.
Finally, under Rule 19(a)(2)(ii), the Arch Defendants and Bolen argue that failure to join
Radian Group could leave the Arch Defendants and Bolen “subject to a substantial risk of
incurring double, multiple, or otherwise inconsistent obligations.” In support of this argument,
the Arch Defendants cite Angst v. Royal Maccabees Life Ins. Co., 77 F.3d 701 (3d Cir. 1996). In
Royal Maccabees, the parties in the federal case were already parties to a state action brought by
the absent party. Id. at 705. The Third Circuit found that the absent party was necessary because
if both the state and federal actions proceeded, the insurance companies involved could be asked
to deposit the proceeds for the same insurance policies in two different accounts, thus subjecting
them to a risk of inconsistent obligations. Id. at 706. The court also found that the existence of a
prior state action would subject the existing parties to a risk of “needless multiple litigation.” Id.
However, the present case can be distinguished from Royal Maccabees. First, a decision
in this case will not impose any “substantial risk of . . . inconsistent obligations” in the event of
future litigation brought by Radian Group. If Radian is successful in this action, Bolen will be
7
enjoined from working for the Arch Defendants in a role that violates her non-competition
agreement and confidentiality obligations. If the Arch Defendants and Bolen are successful,
Bolen will continue in her new position with the Arch Defendants subject to the possibility of a
subsequent suit by Radian Group. Under either outcome, there is no “substantial risk” that the
parties will simultaneously face conflicting obligations of the kind at issue in Royal Maccabees.
The fact that the victorious party may have to face the absent party in another forum at another
time is not sufficient to find that an absent party is a necessary party under Rule 19(a)(2)(ii). See
Sindia, 895 F.2d at 123; Boone v. General Motors Acceptance Corp., 682 F.2d 552, 554 (5th Cir.
1982) (threat of inconsistent obligations, not the possibility of multiple litigation which
determines Rule 19 considerations); Field, 626 F.2d at 301-02 (“[T]he possibility of a
subsequent adjudication that may result in a judgment that is inconsistent as a matter of logic,
[does not] trigger the application of Rule 19.”). Second, unlike Royal Maccabees, there is no
pending state court litigation, thus diminishing the risk of “needless multiple litigation.” Further
reducing the risk of duplicative litigation, Radian Group has filed an affidavit agreeing not to
challenge any judgment in this case and to waive any and all private causes of action it may have
against the Arch Defendants and Bolen based on the claims asserted by Radian.2 See Browne
Aff. ¶¶ 4, 6. Therefore, there is no “substantial risk” of inconsistent obligations or “needless
multiple litigation” in this case.
Thus, because Radian Group is not a necessary party under any of the three prongs of
Rule 19(a), the motion to dismiss for failure to join a necessary and indispensible party will be
denied.
2
I will not decide the legal effect of the affidavit.
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III.
PERSONAL JURISDICTION
Even if the action can proceed without the joinder of Radian Group, the Arch Defendants
argue that the claims against them should be dismissed pursuant to Federal Rule of Civil
Procedure 12(b)(2) because none of the Arch Defendants is subject to personal jurisdiction in
Pennsylvania. The parties do not dispute that this Court has personal jurisdiction over Bolen due
to her express consent to jurisdiction in Section 8(f) of the Stock Grant Agreement.
A. Legal Standard
Under Federal Rule of Civil Procedure 4(k), a district court exercises personal
jurisdiction over a non-resident defendant according to the law of the state where it sits. See Fed.
R. Civ. P. 4(k)(1)(A); O’Connor v. Sandy Lane Hotel Co., Ltd., 496 F.3d 312, 316 (3d Cir.
2007). Here, the Pennsylvania long-arm statute provides for jurisdiction “based on the most
minimum contact with th[e] Commonwealth allowed under the Constitution of the United
States.” 42 Pa. Cons. Stat. Ann. § 5322(b); Mellon Bank v. Farino, 960 F.2d 1217, 1221 (3d Cir.
2002) (finding that Pennsylvania’s long-arm statute is coextensive with the constitutional limits
of due process). Accordingly, a court may exercise personal jurisdiction over a nonresident
defendant if the defendant has “certain minimum contacts with [Pennsylvania] such that the
maintenance of the suit does not offend traditional notions of fair play and substantial justice.”
O’Connor, 496 F.3d at 316 (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).
Unless the defendant’s contacts with the forum are “continuous and systematic,” such that the
court has general personal jurisdiction over the defendant, those contacts must be specifically
related to the present cause of action. See Helicopteros Nacionales de Columbia, S.A. v. Hall,
466 U.S. 408, 414-16 (1984). “Specific personal jurisdiction exists [only] when the defendant
has ‘purposefully directed his activities at residents of the forum and the litigation results from
9
alleged injuries that arise out of or related to those activities.’ ” BP Chems. Ltd. v. Formosa
Chem. & Fibre Corp., 229 F.3d 254, 259 (3d Cir. 2000) (quoting Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 472 (1985)). A party can also consent to personal jurisdiction in a
court through a forum selection clause. See Insurance Corp. of Ireland v. Compagnie des
Bauxites de Guinee, 456 U.S. 694, 704 (1982).
When a defendant moves to dismiss a lawsuit for lack of personal jurisdiction, the
plaintiff bears the burden of showing the basis for jurisdiction. Metcalfe v. Renaissance Marine,
Inc., 566 F.3d 324, 330 (3d Cir. 2009). When the district court does not hold a hearing, the
plaintiff must establish only a prima facie case of personal jurisdiction. O’Connor, 496 F.3d at
316. The plaintiff is entitled to have its allegations taken as true and all factual disputes drawn in
its favor. Id.
B. Discussion
Radian advances two bases for personal jurisdiction in this Court over the Arch
Defendants. First, Radian argues that this Court has specific jurisdiction over the Arch
Defendants because their conduct satisfies the Calder effects test. Second, Radian argues that
while not signatories to the Agreement, the Arch Defendants are bound by the forum selection
clause in Bolen’s Stock Grant Agreement, which includes express consent to personal
jurisdiction in this Court.
1.
Calder Effects Test
Radian argues that this Court has specific personal jurisdiction over all the Arch
Defendants because their conduct meets the Calder effects test. When the plaintiff alleges that
the defendant has committed an intentional tort, the court must analyze the defendant’s contacts
with the forum under the effects test as established by the Supreme Court in Calder v. Jones, 465
10
U.S. 783 (1984). Under the effects test, specific personal jurisdiction exists over the defendant if
the plaintiff can show that: (1) the defendant committed an intentional tort; (2) the plaintiff felt
the brunt of the harm in the forum such that the forum can be said to be the focal point of the
harm suffered by the plaintiff as a result of the tort; and (3) the defendant expressly aimed his
tortious conduct at the forum such that the forum can be said to be the focal point of the tortious
activity. Imo Industries, Inc. v. Kiekert AG, 155 F.3d 254, 265-66 (3d Cir. 1989).
The requirement that the plaintiff demonstrate that the defendant “expressly aimed its
tortious conduct at the forum” is critical to the effects test. Marten v. Godwin, 499 F.3d 290, 265
(3d Cir. 2007). “Simply asserting that the defendant knew that the plaintiff’s principal place of
business was located in the forum would be insufficient in itself to meet this requirement. The
defendant must manifest behavior intentionally targeted at and focused on the forum for Calder
to be satisfied.” IMO Indus., 155 F.3d at 265 (internal quotations marks omitted). As further
explained by a footnote in IMO Industries, the fact that Y knew that its competitor W was owned
by Pennsylvania company X and that X would experience the injury caused by a drop in W’s
value at its headquarters in Pennsylvania would not by itself be enough to meet X’s burden to
show that Y expressly aimed its conduct at Pennsylvania. See id. at 265 n.8. “[T]he state of a
plaintiff’s residence does not on its own create jurisdiction over nonresident defendants.”
Marten, 499 F.3d at 298 (3d Cir. 2007). Additionally, knowledge of a forum selection clause,
standing alone, is not sufficient to confer jurisdiction. Burger King Corp. v. Rudzewicz, 471 U.S.
462, 482 (1985) (holding that choice of law provision is not determinative of whether the court
can exercise personal jurisdiction over a foreign defendant). A defendant cannot be deemed to
have targeted its allegedly intentional tortious conduct at Pennsylvania because it knew that the
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applicable forum selection clause identified Pennsylvania courts as the venue for the resolution
of disputes.
Under this standard, Radian has not met its burden of proof with respect to the third
element of the effects test. Radian argues that the Arch Defendants “aimed their conduct at
Pennsylvania by establishing and maintaining an employment relationship with Bolen.” Radian
Opp. Br. at 24. Radian fails to explain how the creation of the Arch Defendants’ employment
relationship with Bolen intentionally targeted or focused on Pennsylvania. Radian does not
allege that the Arch Defendants met with or recruited Bolen in Pennsylvania. Radian does not
allege that the Arch Defendants hired Bolen to work in or serve customers in Pennsylvania.
Indeed, in both her role with Radian and the Arch Defendants, Bolen worked exclusively from
Texas serving customers in the southern United States. As explained in the case law, the
allegations that the Arch Defendants knew that Radian’s headquarters were in Pennsylvania and
that the forum selection clause identified Pennsylvania courts as the venue for resolving disputes
are insufficient to meet the “expressly aimed” standard. Thus, the Arch Defendants did not
expressly aim their alleged tortious activity at Pennsylvania, and I do not have personal
jurisdiction over any of the Arch Defendants on this basis.
2.
Forum Selection Clause
Radian argues that the Arch Defendants, while not signatories to the Agreement, are
bound by the forum selection clause in Bolen’s Stock Grant Agreement, which provides express
consent to personal jurisdiction in the Eastern District of Pennsylvania. “It is widely accepted
that non-signatory third-parties who are closely related to [a] contractual relationship are bound
by forum selection clauses contained in the contracts underlying the relevant contractual
relationship.” Manetti–Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 514 n.5 (9th Cir.
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1988); Frietsch v. Refco, Inc., 56 F.3d 825, 827 (7th Cir. 1995) (citing Hugel v. Corporation of
Lloyd’s, 999 F.2d 206, 209 (7th Cir. 1993) (“Courts in this country . . . enforce forum selection
clauses in favor of non-parties ‘closely related’ to a signatory.”)).3 “In the Third Circuit, a nonsignatory party may enforce a forum selection clause in a contract if the party is a third-party
beneficiary of the contract or is closely related to the contractual relationship or dispute such that
it is foreseeable that the party will be bound.” D’Elia v. Grand Caribbean Co., Ltd., No. 091707, 2010 WL 1372027, at *3 (D.N.J. Mar. 30, 2010); First Fin. Mgmt. Grp., Inc. v. Univ.
Painters of Balt., Inc., No. 11-5821, 2012 WL 1150131, at *3 (E.D. Pa. Apr. 5, 2012) (quoting
Donachy v. Intrawest U.S. Holdings, Inc., No. 10-4038, 2011 WL 2973543, at *2 (D.N.J. July
21, 2011) (“Third parties that ‘should have foreseen governance by the clause’ may also be
bound by it.”)).
In arguing that the Arch Defendants should be bound by the forum selection clause in
Bolen’s Stock Grant Agreement, Radian relies on the decision in Synthes, Inc. v. Emerge
Medical, Inc., 887 F. Supp. 2d 598 (E.D. Pa. 2012). In Synthes, three sales representatives
entered into confidentiality, non-solicitation, and non-competition agreements containing forum
selection clauses with their employer Synthes, a medical device sales company. Id. at 600.
While working for Synthes, the sales representatives took steps to create and eventually join a
competitor, Emerge Medical, Inc. Id. Synthes brought suit against the sales representatives,
Emerge Medical’s chief operating officer (the “COO”), and Emerge Medical itself. Despite the
fact that the COO was not a party to the non-competition agreements, the Synthes court found
3
Because the parties have not challenged the applicability of federal law to this issue, I will assume without
deciding that federal law applies. See Union Elec. Co. v. Energy Ins. Mut. Ltd., 689 F.3d 968, 970-71 (8th Cir.
2012) (“Further, the parties have not challenged the applicability of federal law to this issue, and they assume that
federal law applies. Accordingly, the district court did not err in applying federal law to determine the enforceability
of the forum selection clause, and we likewise apply federal law in reviewing the enforceability of the forum
selection clause in this case.”).
13
that he was “so closely related to the dispute between Synthes and [the sales representatives] that
he should have reasonably foreseen that he would be bound these forum selection clauses.” Id.
at 611.
The Synthes court found several facts persuasive in reaching its conclusion that the forum
selection clauses applied to the non-signatory third party. First, the COO worked closely with
the sales representatives to develop Emerge while the sales representatives were still employed at
Synthes. Id. at 610. Second, the COO had extensive knowledge of the sales representatives’
non-competition agreements and worked to structure Emerge’s initial business in a way that
would avoid the appearance of a breach of those agreements. Id. at 610-11. Third, the COO and
the sales representatives recognized the risk of legal action to enforce the non-competition
agreements and warned prospective investors of said risk. Id. at 611.
Several other courts in factually analogous cases have found that forum selection clauses
apply to non-signatory third parties. In ELA Medical, Inc. v. Arrhythmia Management
Associates, Inc., No. 06-3580, 2007 WL 892517 (D. Minn. Mar. 21, 2007), ELA Medical, Inc.
(“ELA”) and Deborah Whitney entered into a contract governing Whitney’s employment as an
ELA sales associate that contained a forum-selection clause and a non-competition provision.
Id. at *1. Several years later, Whitney informed ELA that she was terminating the contract and
entered a new contractual sales relationship with an ELA competitor, Biotronik, Inc. Id. ELA
responded by filing an action against Whitney and Biotronik, generally alleging that Whitney
breached ELA’s contract and that Biotronik tortiously interfered with the contract. Id. On a
motion to dismiss for lack of personal jurisdiction, the court found that Biotronik was bound by
the forum selection clause in Whitney’s contract. Id. at *6. It reasoned that “Biotronik, the nonparty to the Contract, is not just the new employer of the individual who agreed to venue in
14
Minnesota and the exercise of personal jurisdiction over her by the Minnesota courts in the
Contract with her former employer. It appears that Biotronik actively sought the employ of
Whitney knowing that she was then employed by ELA under the Contract containing the clauses
at issue.” Id. The court went on to note that the “defendants thus seem to share a common
interest in . . . facilitating the immediate employment of Whitney as a sales representative for
Biotronik unfettered by any restrictions in the Contract.” Id. Further, it found that Biotronik had
acknowledged that it was clearly aware of the contract for some time, knew that ELA intended to
file suit to enforce the contract, and expressly sought a judicial declaration of its rights and
duties. Id. The court concluded that, “[h]aving sought such a declaration, Biotronik cannot now
claim that the resulting litigation it expected ELA to file for breach of that contract would not be
subject to its provision mandating a Minnesota forum.” Id.; see also St. Jude Med., S.C., Inc. v.
Biosense Webster, Inc., No.12-621, 2012 WL 1576141, at *5 (D. Minn. May 4, 2012) (new
employer of individual employee that breached an employment agreement with former employer
was bound by forum selection clause in employee’s agreement because it was so closely related
to the dispute involving tortious contractual interference that it was foreseeable that it would be
bound).
“[T]hese cases share the common thread that the close business relationships between the
signatories and non-signatories to the pertinent agreements, together with the fact that the dispute
among the parties centered on the interpretation of the agreements, provided a sufficient basis on
which to apply the forum selection clauses to the non-signatory.” Synthes, Inc., 887 F. Supp. at
610. The facts of this case follow the same pattern. First, while still employed at Radian, Bolen
interviewed with and emailed repeatedly with Richard Izen, Executive Vice President of Sales &
Marketing at Arch MI Services and Arch MI Holdings. See Higgins Decl. Exs. D, G & J, ECF
15
No. 45. Bolen was among the very first candidates hired to lead the sales team at the newly
formed Arch U.S. Mortgage Insurance,4 pending the closing of the PMI acquisition. See Higgins
Decl. Ex. O. Second, both Izen and David Gansberg, Chairman and CEO of Arch MI Services
and Arch MI Holdings, knew of Bolen’s non-competition agreement with Radian as early as
August 16, 2013. See Higgins Decl. Ex. F. Nevertheless, on August 19, 2013, Izen offered
Bolen a job with Arch MI Services. See Higgins Decl. Ex. J. A day later, Bolen submitted a
completed job application in which she crossed out language certifying that she had “not signed
any kind of restrictive covenant document creating any obligation to any former employer that
would restrict my acceptance of employment with the Company.” See Higgins Decl. Ex. M.
Despite this warning, Izen continued to pursue Bolen. See Higgins Decl. Exs. O & Q. On
August 26, 2013, Bolen emailed Izen and an Arch human resources representative a copy of her
Stock Grant Agreement with Radian Group. See Higgins Decl. Ex. P. That same day she signed
an offer letter from Arch MI Services. See Higgins Decl. Ex. R. Third, Gansberg and his
superiors recognized the risk of hiring a new employee with a non-competition agreement. See
Higgins Decl. Ex. F. Despite this knowledge, the Arch Defendants’ August 23, 2013 offer letter
sought a representation from Bolen that she was “not a party to or bound by any employment
agreement, noncompetition agreement or similar agreement with any other person or entity.” See
Higgins Decl. Ex. O. The Arch Defendants privilege log also suggests that the Arch Defendants
consulted with an attorney regarding the non-competition provision in Bolen’s Stock Grant
Agreement. See Higgins Decl. Ex. W. Having sought to employ Bolen while knowing that she
was employed by Radian under a contract with a non-competition agreement, Arch MI Services
and Arch MI Holdings are sufficiently closely related to Bolen so as to foresee being bound by
4
Arch MI Services and Arch MI Holdings do business in the United States under the name “Arch U.S. Mortgage
Insurance” or “Arch U.S. MI.”
16
the forum selection clause in the Stock Grant Agreement.
With respect to Arch Group and Arch Group US, however, Radian has not established a
prima facie case of personal jurisdiction on the basis of the effects test. Radian has shown that
Andrew Rippert, CEO of Global Mortgage Insurance and Reinsurance at Arch Group, as well as
executives of other Arch-related entities, were aware of Bolen’s non-competition agreement as
early as August 16, 2013. See Higgins Decl. Ex. F. Additionally, on August 20, 2013, pursuant
to the requirements of Arch Group’s stock incentive plans, Constantine Iordanou, President and
CEO of Arch Group, approved the equity award in Bolen’s proposed compensation. See Higgins
Decl. Ex. N. This is the extent of the evidence suggesting any business relationship between
Bolen and these defendants. There is no evidence that Bolen ever met or communicated with
executives from Arch Group or Arch Group US, and there is no evidence that Arch Group or
Arch Group US had any detailed knowledge of the Stock Grant Agreement. Thus, neither Arch
Group nor Arch Group US are so closely related to the contractual relationship or dispute that it
is foreseeable that they would be bound by the forum selection clause in Bolen’s Stock Grant
Agreement with Radian. Thus, I have personal jurisdiction over Arch MI Services and Arch MI
Holdings under the Stock Grant Agreement’s forum selection clause, but I lack personal
jurisdiction on this basis over Arch Group or Arch Group US.
3.
Parent-Subsidiary Relationship
Given the lack of personal jurisdiction over Arch Group or Arch Group US on the basis
of the Calder effects test or the forum selection clause, I will also analyze the exercise of
personal jurisdiction over Arch Group and Arch Group US on the basis of their parent-subsidiary
relationship with Arch MI Services and Arch MI Holdings.
“Generally, a foreign corporation is not subject to the jurisdiction of the forum state
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merely because of its ownership of the shares of stock of a subsidiary doing business in the
state.” Lucas v. Gulf & W. Indus., Inc., 666 F.2d 800, 805-06 (3d Cir. 1981); see also Cannon
Manufacturing Co. v. Cudahy Packing Co., 267 U.S. 333, 336 (1925) (holding that where a
foreign parent uses a subsidiary to conduct business in the forum state, the subsidiary does not
necessarily subject the parent to jurisdiction when the corporate separation, though formal, is
real). However, “federal courts have consistently acknowledged that it is compatible with due
process for a court to exercise personal jurisdiction over an individual or a corporation . . . when
the individual or corporation is an alter ego or successor of a corporation that would be subject to
personal jurisdiction in that court.” Patin v. Thoroughbred Power Boats Inc., 294 F.3d 640, 653
(5th Cir. 2002) (finding that under the alter ego theory, a corporation’s waiver of personal
jurisdiction could be imputed to its successor or individual alter ego).
Under the alter ego theory of jurisdiction, a court may exercise personal jurisdiction over
the parent based on the subsidiary’s connection to the forum if the plaintiff can show that “the
parent controls the day-to-day operations of the subsidiary such that the subsidiary can be said to
be a mere department of the parent.” Simeone ex rel. Estate Of Albert Francis Simeone, Jr. v.
Bombardier-Rotax GmbH, 360 F. Supp. 2d 665, 675 (E.D. Pa. 2005) (citing Arch v. Am.
Tobacco Co., 984 F. Supp. 830, 837 (E.D. Pa.1997)). As part of this inquiry, courts in this
District often consider the following discrete factors: (1) ownership of all or most of the stock of
the subsidiary; (2) common officers and directors; (3) a common marketing image; (4) common
use of a trademark or logo; (5) common use of employees; (6) an integrated sales system; (7)
interchange of managerial and supervisory personnel; (8) performance of business functions by
the subsidiary which the principal corporation would normally conduct through its own agents or
departments; (9) marketing by the subsidiary on behalf of the principal corporation, or as the
18
principal’s exclusive distributor; and (10) receipt by the officers of the subsidiary corporation of
instruction from the principal corporation. Simeone, 360 F. Supp. 2d at 675 (citations omitted).
In the present case, Radian fails to make out a prima facie case that Arch MI Services and
Arch MI Holdings are the alter egos of Arch Group and Arch Group US. In support of the case
for finding an alter ego relationship, Arch Group indirectly owns 100 percent of the voting
securities of Arch MI Holdings. See Higgins Decl. Ex. T at 5. Additionally, the President and
CEO of Arch Group approved the equity award contemplated as a part of Bolen’s compensation
offer. See Higgins Decl. Ex. N (noting that awards of Arch Group stock as incentive-based
compensation to non-executives require the approval of the Arch Group CEO, but “[t]hese
procedures have not been created for purposes of authorizing hiring decisions.”). On the other
hand, Radian has not presented any evidence that Arch Group and Arch Group US share officers
or directors, employees, sales systems, or managerial personnel with Arch MI Services or Arch
MI Holdings. To the contrary, according to the company’s Sales Directory, Executive Vice
President Richard Izen leads a sales force exclusive to Arch U.S. MI. See Higgins Decl. Ex. N.
There is no evidence that Izen or Chairman and CEO David Gansberg hold any positions in the
parent companies, and Izen and Gansberg independently hired and negotiated compensation with
new employees at the new Arch U.S. MI. See Higgins Decl. Exs. F (requesting “suggestions”
but not approval from Arch Group executives on proposed hires and compensation packages) &
DD. Finally, Radian has not presented any evidence that Arch MI Services and Arch MI
Holdings act as the marketing arm or exclusive distributor of Arch Group or Arch Group US or
perform other business functions that a parent would normally perform through its own agents.
Thus, the evidence is insufficient to support even a prima facie case that subsidiaries Arch MI
Services and Arch MI Holdings are “mere department[s]” of parents Arch Group and Arch
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Group US. For the preceding reasons, I lack personal jurisdiction over Arch Group and Arch
Group US, and I will dismiss the claims against these parties.
IV.
MOTION TO TRANSFER
In the alternative, the Arch Defendants, joined by Bolen, move for a transfer of the case
to the Eastern District of Texas pursuant to 28 U.S.C. § 1404(a). Section 1404(a) provides: “For
the convenience of parties and witnesses, in the interest of justice, a district court may transfer
any civil action to any other district or division where it might have been brought or to any
district or division to which all parties have consented.” 28 U.S.C. § 1404(a). In deciding
whether to transfer a case, a court must consider “the private and public interests protected by the
language of § 1404(a).” Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995).
“[T]here is no definitive formula or list of the factors to consider . . . .” Id. Private interests that
have been considered include:
[P]laintiff’s forum preference as manifested in the original choice; the defendant’s
preference; whether the claim arose elsewhere; the convenience of the parties as
indicated by their relative physical and financial condition; the convenience of the
witnesses-but only to the extent that the witnesses may actually be unavailable for
trial in one of the fora; and the location of books and records (similarly limited to
the extent that the files could not be produced in the alternative forum).
Id. (internal citations omitted). Public interests that have been considered include:
[T]he enforceability of the judgment; practical considerations that could make the
trial easy, expeditious, or inexpensive; the relative administrative difficulty in the
two fora resulting from court congestion; the local interest in deciding local
controversies at home; the public policies of the fora; and the familiarity of the
trial judge with the applicable state law in diversity cases.
Id. at 879-80 (internal citations omitted). The burden of establishing the need for transfer rests
with the movant, and “in ruling on defendants’ motion the plaintiff’s choice of venue should not
be lightly disturbed.” Id. at 879; see also Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3d Cir.
1970) (“It is black letter law that a plaintiff’s choice of a proper forum is a paramount
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consideration in any determination of a transfer request . . . .”).
While the case could have been brought in the Eastern District of Texas, the Arch
Defendants and Bolen have not established that the balance of public and private interests weighs
in favor of the requested transfer. The parties place significant emphasis on the relative weight
of the forum selection clause while ignoring the clear language in the clause waiving any
objection to the laying of venue in this court. See Restricted Stock Unit Grant, Compl. Ex. B. at
7 (§8(f)) (“The Grantee irrevocably and unconditionally . . . (iii) waives any objection to the
laying of venue of any such proceeding in any such court.”) (referring to the United States
District Court for the Eastern District of Pennsylvania or any court of general jurisdiction in
Philadelphia County, Pennsylvania). District courts applying Delaware law, the governing law
of the Stock Grant Agreement, have remanded cases removed from state court when faced with
similar language waiving objections to venue. See Carlyle Inv. Mgmt., L.L.C. v. Carlyle Capital
Corp. Ltd., 800 F. Supp. 2d 639, 645 (D. Del. 2011) (concluding that defendants waived right to
object to plaintiffs’ choice of forum based on forum selection clause stating that “each party
hereto hereby irrevocably waives, to the fullest extent permitted by law, any objection that it may
have, whether now or in the future, to the laying of venue in, or to the jurisdiction of, any and
each of such courts”); E.I. Du Pont De Nemours & Co. v. Quality Carriers, Inc., No. 10-534,
2011 WL 776211, at *3 (D. Del. Feb. 28, 2011) (finding that forum selection clause (“the Parties
hereby reciprocally and irrevocably waive in advance any and all objections to the Delaware
courts as forums . . . .”) clearly indicated that the parties irrevocably waived the right to remove).
Because I find that the Arch Defendants and Bolen are both bound by the forum selection clause,
I find that they have waived their right to object to Radian’s choice of venue and that the motion
to transfer the case to the Eastern District of Texas should be denied.
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Regardless of this waiver, the private interest factors in the § 1404(a) analysis weigh
against granting the motion to transfer to the Eastern District of Texas. As explained above,
Radian’s choice of forum in this Court weighs heavily in favor of the case remaining here. With
respect to the impact of the forum selection clause, in Atl. Marine Const. Co., Inc. v. U.S. Dist.
Court for W. Dist. of Texas, 134 S. Ct. 568 (2013), the Supreme Court found that “[w]hen parties
agree to a forum-selection clause, they waive the right to challenge the preselected forum as
inconvenient or less convenient for themselves or their witnesses, or for their pursuit of the
litigation. A court accordingly must deem the private-interest factors to weigh entirely in favor
of the preselected forum.” Id. at 582. While the forum selection clause at issue in Atlantic
Marine was mandatory, the forum selection clause in this case is permissive. Restricted Stock
Unit Grant, Compl. Ex. B. at 7 (§8(f)) (“any legal proceeding arising out of this paragraph may
be brought in the United States District Court for the Eastern District of Pennsylvania”)
(emphasis added). Since Atlantic Marine, district courts have split on whether the private
interest factors weigh entirely in favor of the preselected forum in the presence of a permissive
forum selection clause. Compare RELCO Locomotives, Inc. v. AllRail, Inc., No. 13-00394, 2014
WL 1047153, at *8 (S.D. Iowa Mar. 5, 2014) (conducting traditional forum non conveniens
analysis in the context of a permissive forum selection clause) with Compass Bank v. Palmer,
No. 13-831, 2014 WL 355986, at *5-6 (W.D. Tex. Jan. 30, 2014) (finding forum selection
clauses permissive and following Atlantic Marine’s direction for enforcement for forum
selection clauses within the § 1404(a) framework). Without deciding that question, I agree
generally with the Supreme Court that the existence of a forum selection clause of any kind
significantly undercuts any argument that the preselected forum is inconvenient for the parties or
their witnesses. The Third Circuit previously made clear that “a forum selection clause is
22
treated as a manifestation of the parties’ preferences as to a convenient forum.” Jumara, 55 F.3d
at 880. Therefore, while acknowledging that both the Arch Defendants and Bolen would prefer
to litigate in the Eastern District of Texas, I find that the convenience of the parties and the
witnesses is not a compelling factor in favor of transfer. As for the remaining private interest
factors, I recognize relevant records may be in the Eastern District of Texas where Bolen has
worked for both Radian and the Arch Defendants; however, I am less inclined to give this factor
significant weight in light of current technology. Thus, the public interest favors weigh against
the transfer of the case.
The public interest factors also weigh in favor of retaining this case in the Eastern District
of Pennsylvania. A judgment rendered in this Court is equally as enforceable as one rendered by
the Eastern District of Texas. Bolen claims that trying the case in this District would be
“expensive, inefficient, and cumbersome . . . when virtually all of the witnesses are located in
Texas.” Bolen Br. at 6. In response, Radian argues that there are a number of Philadelphiabased Radian employees whose testimony may be critical to the case. Transfer of this action to
Texas is not justified when it would simply shift any expense associated with witness travel to
Radian. See Rogal v. Skilstaf, 446 F. Supp. 2d 334, 335 (E.D. Pa. 2006) (“The purpose of §
1404(a) . . . [is] not to shift the inconvenience from one party to the other.”). The speed with
which matters are resolved in each venue is of little significance to this case in which Radian
seek expedited relief; accordingly, the relative administrative difficulty in the two venues does
not warrant transfer to the Eastern District of Texas. As for the local interest in deciding local
controversies at home, this Court has a greater interest in deciding the case because it involves
alleged injury sustained by a local Pennsylvania company. Finally, in regard to the familiarity of
the trial judge with applicable state law, the Stock Grant Agreement at the center of this case is
23
governed by Delaware law with which this Court is familiar. See Restricted Stock Unit Grant,
Compl. Ex. B. at 9 (§13). The public interest factors do not warrant transfer to the Eastern
District of Texas. Thus, the motion to transfer this action will be denied.
V.
CONCLUSION
In summary, I will deny the Arch Defendants’ motion to dismiss the suit for failure to
join an indispensible party. On the personal jurisdiction issue, I will deny the motion to dismiss
the claims asserted against Arch MI Services and Arch MI Holdings, and I will grant the motion
to dismiss the claims asserted against Arch Group and Arch Group US. I will deny the Arch
Defendants’ motion to transfer the suit to the Eastern District of Texas pursuant to 28 U.S.C. §
1404(a). Finally, I will deny the Arch Defendants’ request for costs and attorneys’ fees.
s/Anita B. Brody
____________________________________
ANITA B. BRODY, J.
Copies VIA ECF on _________ to:
Copies MAILED on _______ to:
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