TGG Ultimate Holdings, Inc. v. Hollett

224 F. Supp. 3d 275, 2016 U.S. Dist. LEXIS 177613, 2016 WL 7377239
CourtDistrict Court, S.D. New York
DecidedDecember 12, 2016
Docket16-CV-6289 (VM)
StatusPublished
Cited by7 cases

This text of 224 F. Supp. 3d 275 (TGG Ultimate Holdings, Inc. v. Hollett) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
TGG Ultimate Holdings, Inc. v. Hollett, 224 F. Supp. 3d 275, 2016 U.S. Dist. LEXIS 177613, 2016 WL 7377239 (S.D.N.Y. 2016).

Opinion

DECISION AND ORDER

VICTOR MARRERO, United States District Judge.

Plaintiffs TGG Ultimate Holdings, Inc., TGG Holdings, Inc., TGG Sub Inc., and The Gordian Group, Inc. (collectively, “TGG”) commenced this action against Defendants Joseph Hollett (“Hollett”), John Ledezma (“Ledezma”), Laura Romero (“Romero”), and Martin Garcia (“Garcia”) (collectively, “Defendants”), asserting claims of breach of contract and breach of the covenant of good faith and fair dealing. (“Complaint,” Dkt. No. 1.) TGG’s Complaint was filed more than one month after Defendants commenced their own action against TGG in California based essentially on the same facts (the “California Action”). Since TGG’s filing of the Complaint on August 9, 2016, the parties have, pursuant to the Court’s Individual Practices, exchanged pre-motion letters regarding the validity of the two litigations. Defendants, alleging that California law applies, rather than New York law, contend that this litigation should be dismissed in favor of the California Action. The Court now construes the correspondence described above as a motion by Defendants to dismiss the Complaint (“Motion”). For the reasons discussed below, Defendants’ Motion is DENIED.

I. BACKGROUND

A. Facts and Procedural History

TGG Ultimate Holdings, Inc., TGG Holdings, Inc., and TGG Sub Inc. are job [279]*279order contracting (JOC) companies incorporated in Delaware with their principal place of business in South Carolina. The Gordian Group, Inc., another JOC company, is incorporated in Georgia, with its principal place of business also in South Carolina. TGG conducts operations in the Southwestern United States, including in California. (See Dkt. No. 1, at 4.) TGG maintains no operations in New York, but it has one major client in New York—the New York Department of Education—and holds quarterly meetings with that client in New York City.

Defendants are residents of California and former employees of TGG in California. Hollett left his employment with TGG in February 2013; Ledezma left his employment in November 2015; and both Romero and Garcia left on June 30, 2016. (Dkt. No. 1, at 8, 12, 16, 20.)

TGG filed this action to enjoin Defendants from violating their post-employment obligations, arising from non-compete and non-solicitation agreements they signed in 2012 (the “2012 Non-Compete Agreements”). TGG alleges that: (1) Defendants downloaded TGG’s proprietary information, including client action plans and financials; .(2) Hollett formed JAMB Services, Inc., a JOC company, to compete with TGG, and solicited the other Defendants and employees of TGG to work for JAMB; (3) Garcia and Romero downloaded proprietary company information from TGG before terminating their employment, so they could share the information with the other Defendants; and (4) these actions jeopardized TGG’s business relationships, in breach of contract and in breach of Defendants’ duty of good faith and fair dealing. (Dkt. No. 1, at 20-24.) TGG sought preliminary and permanent injunc-tive relief, as well as compensatory, statutory, punitive, and treble damages. (See id. at 28.)

On June 29, 2016, prior to the filing of the present lawsuit and one' day before Romero and Garcia terminated their employment with TGG, Defendants filed the California Action in California state court, alleging that the 2012 Non-Compete Agreements violated California Business and Professions Code Sections 1660 and 17200, and California public policy disfavoring restrictive covenants. Defendants removed the California Action to the United States Distinct Court for the Central District of California. Their complaint alleged that the 2012 Non-Compete Agreements violated California Business and Professions Code Sections 1660 and 17200, and California policy disfavoring restrictive covenants. (See Dkt. No. 6, Exhibit G.)1 Defendants’ original complaint in the California Action did not incorporate or attach the 2012 Non-Compete Agreements with the New York choice-of-law and forum-selection provisions. TGG claims that the timing of Defendants’ filing of the California Action indicates their intent to violate the 2012 Non-Compete Agreements.

The 2012 Non-Compete Agreements contain choice-of-law and forum selection provisions agreeing to jurisdiction in New York state or federal courts, and to the application of New York law:

(c) Governing Law. This agreement will be governed by and construed in accordance with the substantive and procedural laws of the State of New York (without giving effect to any choice of law or conflict of law rules or provisions) applicable to agreements made and to be [280]*280performed entirely within such state....
(e) Submission to Jurisdiction; Consent to Service of Process. The parties hereto hereby irrevocably submit to the exclusive jurisdiction of any federal or state court located within the Borough of Manhattan in the city and state of New York over any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby and each party hereby irrevocably agrees that all claims in respect of such dispute or any suit, action proceeding related thereto may be heard and determined in such courts.

Dkt. No. 6, Exhibit A at 5-6; Exhibits B, C, D, at 5.

On August 9, 2016, TGG filed the instant Complaint in this Court and moved for a preliminary injunction and temporary restraining order prohibiting Defendants from competing with TGG and engaging in trade secret misappropriation. (See “Preliminary Injunction Motion,” Dkt. No. 6.) Defendants opposed TGG’s Motion for Preliminary Injunction, arguing that (1) California law should apply in determining whether to give effect to the forum selection clause in each of Defendants’ contracts with TGG, and under such circumstances the case should be dismissed in favor of the California court; (2) the most significant interests in the case are in California, not New York, and therefore the choice-of-law provisions should not be enforced; (3) because the California Action was filed before the New York case, the competing interests weighed in favor of California jurisdiction; and (4) because there was no attempt by Defendants to forum shop, the first-to-file rule would favor California jurisdiction. (Dkt. No. 7, at 15-16.) Defendants also stated their intention to file a motion to dismiss.

In response, TGG argued that the Non-Compete Agreements’ choice-of-law and forum selection provisions determine the application of New York law and New York forum, and therefore the first-to-file argument is foreclosed. (See Dkt. No. 11, at 1.) The Court held a hearing on the Motion for Preliminary Injunction on August 17, 2016. (See Dkt. Minute Entry dated August 17, 2016.)

By letter dated August 24, 2016, TGG supplemented its Motion for Preliminary Injunction, arguing that Defendants filed the California Action in bad faith to escape New York jurisdiction, and that the Non-Compete Agreements are valid under New York law. (See “August 24 Letter,” Dkt. No. 12.) The same day, Defendants responded, disputing TGG’s claim of bad faith and citing New York precedent unfriendly to restrictive covenants. (See id.) The Court denied TGG’s Motion for Preliminary Injunction and a Temporary Restraining Order on August 29, 2016. (See Dkt. No. 14.)

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224 F. Supp. 3d 275, 2016 U.S. Dist. LEXIS 177613, 2016 WL 7377239, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tgg-ultimate-holdings-inc-v-hollett-nysd-2016.