United American Healthcare Corp. v. Backs

997 F. Supp. 2d 741, 2014 U.S. Dist. LEXIS 17408, 2014 WL 555194
CourtDistrict Court, E.D. Michigan
DecidedFebruary 12, 2014
DocketCase No. 13-13570
StatusPublished
Cited by13 cases

This text of 997 F. Supp. 2d 741 (United American Healthcare Corp. v. Backs) is published on Counsel Stack Legal Research, covering District Court, E.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United American Healthcare Corp. v. Backs, 997 F. Supp. 2d 741, 2014 U.S. Dist. LEXIS 17408, 2014 WL 555194 (E.D. Mich. 2014).

Opinion

OPINION AND ORDER

SEAN F. COX, District Judge.

This case involves a contract dispute. Plaintiff United American Healthcare Corporation (“United”) alleges that Defendants Demian Backs (“Backs”) and Vince Barletta (“Barletta”) (collectively, “Defendants”) breached the parties’ Stock Purchase Agreement (“SPA”) by misappropriating the proprietary information of, and directly competing with, United’s wholly-owned subsidiary and Defendants’ former employer, Pulse Systems LLC (“Pulse”).

This matter is before the Court on Defendants’ Combined Motion to Compel Arbitration, Or Transfer Venue, Or Stay Proceedings (Doc. #7). Plaintiff opposes Defendants’ motion, and the motion has been fully briefed by the parties. This Court finds that the issues have been adequately presented in the parties’ briefs and that oral argument would not significantly aid in the decisional process. See Local Rule 7.1(f)(1), U.S.D.C., E.D. MI. This Court orders that the motion will be decided upon the briefs. For the reasons set forth below, this Court DENIES Defendants’ motion in its entirety.

BACKGROUND

Plaintiff United American Healthcare Corporation is a Michigan corporation1 with its principal place of business in Chicago, Illinois. It is unclear exactly what type of business that United conducts, but the parties agree that United now owns 100% of the stock in Pulse Systems, LLC. Pulse is located in California.

Defendant Demian Backs was an employee of Pulse from September 2003 until June 2013. Defendant Vince Barletta was the former President and CEO of Pulse until August 28, 2007. Backs entered into a “Confidential Information and Invention Assignment Agreement” with Pulse. (Def.’s Mo. at Ex. 2(A)). This contract contains a confidentiality clause, a nonsoli-citation clause, a noncompetition clause, and an arbitration agreement. (Def.’s Mo. at Ex. 2(A)).

Barletta entered into an Employment Agreement with Pulse that contains, inter alia, covenants concerning confidentiality [744]*744of proprietary information owned by Pulse, noncompetition with Pulse after the end of employment, and nonsolicitation of Pulse employees after the end of employment. This agreement also contains an arbitration clause. See generally, Employee Agreement, attached to Defs.’ Mo. at Ex. 1(A).

In 2010, according to Plaintiff, Defendants appointed John Fife to represent them in a sale of their Pulse shares of stock to United. These negotiations, which allegedly took place at United’s office in Detroit, Michigan, culminated in Plaintiff and Defendants’ negotiation and execution of a Stock Purchase Agreement (“SPA”). {See SPA, attached to Compl. at Ex. A). The Stock Purchase Agreement contained confidentiality, noncompetition and nonsol-icitation clauses similar to those found in the Employment Agreements. The SPA does not contain an arbitration agreement, but does contain jurisdiction and choice-of-law provisions.

In 2013, after Defendants left the employ of Pulse, they formed a company called Aduro. Plaintiff alleges that Aduro was formed for the sole purpose of directly competing with Pulse. Plaintiff also alleges that during their last years at Pulse, Defendants had “unfettered access” to Pulse’s proprietary information and data, and that Defendants gathered and later misappropriated that information for the benefit of their new company. Plaintiff also alleges that once Aduro was formed, Defendants solicited Pulse employees and Pulse customers.

a) The California State Court Litigation

On or around July 29, 2013, Pulse filed suit against Defendants Backs and Barlet-ta, as well as other individuals, in California state court. Pulse alleges that defendants misappropriated Pulse’s confidential proprietary information in order to set up the Aduro business and compete with Pulse. The California complaint contains nine causes of action against all defendants:

1) Misappropriation of Trade Secrets;

2) Intentional Interference with Contractual Relations;

3) Intentional Interference with Prospective Economic Advantage;

4) Negligent Interference with Prospective Economic Advantage;

5) Trespass to Chattels;

6) Conversion;

7) Unfair Competition;

8) Unjust Enrichment/Restitution;

9) An Accounting.

(Defs.’ Br. at Ex. 3(A)). On September 3, 2013, defendants in the California action moved to compel arbitration, and Pulse agreed to arbitration on October 11, 2013. (PL’s Resp. at 3).

b) The Stock Purchase Agreement

The SPA existing between Plaintiff and Defendants contains a few covenants relevant to the case at bar, including a covenant entitled “Confidentiality; Covenant Not to Compete; Covenant Not to Solicit,” whereby each Defendant promised to “treat and hold as confidential all of the proprietary information of [Pulse Systems, LLC] and the Business ... and refrain from using any of the confidential information .... ” (SPA section 6.3(a), attached to Pl.’s Compl. at Ex. A, p. 36). The parties further agreed that

For a period of five (5) years following the Closing Date, no Seller nor any of its Affiliates will, directly or indirectly, knowingly solicit or hire any employee or consultant of [Pulse Systems, LLC] for any employment or consulting arrangement or otherwise interfere with [745]*745such individual’s relationship with [Pulse Systems, LLC] or its Affiliates without the buyer’s prior written consent, or induce or attempt to induce any current or former customer, supplier or other business relation of [Pulse Systems, LLC] or its Affiliates into any business relationship which might harm the business.

(SPA section 6.3(b), attached to Pl.’s Compl. at Ex. A, p. 36-37).

The Stock Purchase Agreement also contains a Forum Selection Clause, which states that:

Each of the Parties submits to the jurisdiction of any state or federal court sitting in the State of Michigan in any proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum....

(SPA section 9.19).

c) The Federal Complaint

Plaintiff, in its Complaint, alleges that Defendants’ positions at Pulse Systems allowed them “unfettered access” to all of Pulse’s confidential information. (PL’s Compl. at ¶ 19). Plaintiff alleges that Defendant Backs collected confidential technical and proprietary information while he was employed at Pulse using his personal e-mail accounts and online cloud storage solutions. (PL’s Compl. at ¶ 23).

The gravamen of Plaintiffs complaint against these Defendants is that they “unjustifiably and inexcusably breached their obligations under the SPA by, among other things: (i) using confidential and proprietary information to create a directly competing business; (ii) soliciting Pulse LLC’s employees and consultants for employment; and (iii) soliciting Pulse LLC’s customers.” (PL’s Compl. at ¶ 35). Plaintiff has pleaded one breach of contract claim against Defendants based on their alleged breach of the SPA.

ANALYSIS

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Bluebook (online)
997 F. Supp. 2d 741, 2014 U.S. Dist. LEXIS 17408, 2014 WL 555194, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-american-healthcare-corp-v-backs-mied-2014.