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Monitronics International Inc. v. Skyline Security Management Inc.

United States District Court, N.D. Texas, Dallas Division

July 5, 2017

MONITRONICS INTERNATIONAL, INC., Plaintiff,
v.
SKYLINE SECURITY MANAGEMENT, INC. and EDWIN ARROYAVE, Defendants.

          MEMORANDUM OPINION AND ORDER

          BARBARA M. LYNN JUDGE

         Before the Court are two separate Fed.R.Civ.P. 12(b)(6) Motions to Dismiss and, in the alternative, Fed.R.Civ.P. 12(e) Motions for More Definite Statement, filed by Defendants Skyline Security Management, Inc. (“Skyline”) [ECF #9] and Edwin Arroyave (“Arroyave”) [ECF #11]. For the following reasons, the Motions are DENIED.

         Background[1]

         Monitronics International, Inc. (“Plaintiff” or “Monitronics”) is in the business of providing security alarm monitoring services to residential and business customers throughout the United States. See Pl. Compl. [ECF #1] at 4, ¶7. Defendant Skyline is an independent security alarm installation and monitoring company, which is owned and controlled by Defendant Arroyave. See id. at 2, ¶4. Plaintiff alleges Monitronics entered into a dealer relationship with Skyline in January 2009, pursuant to which Skyline sold security alarm equipment to individual customers and then assigned the related alarm monitoring contracts to Plaintiff under the terms of an Alarm Monitoring Purchase Agreement (“AMPA”). See Id. at 4, ¶¶8-10. Over the course of the parties' five-year relationship, Plaintiff allegedly paid Skyline more than $50 million for the assignment of approximately 30, 000 alarm monitoring contracts. Id. at 5, ¶¶ 20-21.

         The AMPA contains various restrictive covenants prohibiting Skyline from soliciting Monitronics customers. In particular, paragraph 2.03(a) of the AMPA provides for a 15-year restriction on Skyline's solicitation of customer accounts Skyline sold to Monitronics:

Seller [Skyline] agrees with Purchaser [Monitronics] that neither Seller nor any of its shareholders, partners, members, owners, officers, directors, agents or employees shall, at any time within fifteen (15) years from the date such [Subscriber Contract] was acquired by Purchaser from Seller, directly or indirectly, in any capacity, contact, solicit or attempt to solicit or accept unsolicited monitoring or alarm installation business from the Subscriber to whom such Contract related, . . . Purchaser and Seller agree that the amount of damage resulting to Purchaser from a violation of this Section is difficult to ascertain and quantify, and therefore Seller acknowledges and agrees that Purchaser shall be entitled to liquidated damages from Seller in the amount of any affected Contract's monthly payment to Purchaser multiplied by fifty (“Liquidated Damage Provision”), in addition to permanent injunctive and other applicable relief.

See Id. at 6-7, ¶27; see also id., Ex. A at 4, ¶2.03(a) (emphasis added). Plaintiff alleges that this provision prohibited Skyline from re-soliciting the very same customer accounts that Skyline originated and sold to Monitronics, pursuant to the AMPA. Id. at 7, ¶28.

         The AMPA also contains a broader, two-year restriction affecting all Monitronics customer accounts. Paragraph 2.03(b) of the AMPA provides, in pertinent part:

Seller [Skyline] further agrees that during the term of this Agreement, and for a period of twenty four (24) months following any termination or expiration of this Agreement, that neither it, nor any of its shareholders, partners, members, owners, officers, directors, agents or employees shall solicit, market or sell alarm monitoring services or contracts to any current customer(s) of Purchaser [Monitronics]. . . Purchaser and Seller agree that the amount of damage resulting to Purchaser from a violation of this Section is difficult to ascertain and quantify, and therefore Seller acknowledges and agrees that Purchaser shall be entitled to liquidated damages from Seller in the amount of any affected Contract's monthly payment to Purchaser multiplied by fifty (“Liquidated Damage Provision”), in addition to permanent injunctive and other applicable relief.

See Id. at 7-8, ¶32; see also id., Ex. A at 4, ¶2.03(b) (emphasis added). Plaintiff alleges that this provision prohibited Skyline from trying to switch any Monitronics customer to another alarm monitoring service for a period of two years after the termination of the Monitronics/ Skyline relationship. Id. at 7, ¶29.

         Plaintiff alleges that Arroyave, as Skyline's owner, agreed to be individually bound by, and responsible for any breach of, the restrictive covenants contained in the AMPA. Page 15 of the AMPA between Skyline and Monitronics provides:

The persons listed below hereby represent and warrant that they are all the shareholders, partners, members or owners of Seller [Skyline], as applicable, and that they hereby join in execution of this Agreement in order to signify their agreement to be personally bound by the non-solicitation provisions of Section 2.03, . . . as if each of their individual names were stated in place of “Seller” in Sections 2.03, . . . and each of the undersigned further represents, warrants and acknowledges that each of such persons has received a substantial benefit from Purchaser [Monitronics] by virtue of this Agreement between Purchaser and Seller and, therefore, good and valuable consideration has been given to each of the undersigned for the agreement by each of the undersigned to be personally bound by the provisions of Sections 2.03 . . . .

See Id. at 9, ¶51; see also id., Ex. A at 15 (emphasis added). Arroyave signed page 15 identifying himself as “all the shareholders, partners, members or owners of” Skyline and agreeing to be personally bound by the non-solicitation provisions of paragraph 2.03 of the AMPA. See id., Ex. A at 15. Arroyave also signed a separate “Individual Non-solicitation/ Non-compete Agreement, ” pursuant to which Arroyave agreed not to solicit any of the accounts Skyline sold to Monitronics for a period of fifteen years. Id. at 9-10, ¶¶42-44. Arroyave's Individual Non-solicitation Agreement provides, in pertinent part:

Principal(s) [Arroyave] agree(s) with Purchaser [Monitronics] that Principal(s) shall not, at any time within fifteen (15) years from the date such Contract was acquired by Purchaser from Seller, directly or indirectly, in any capacity (including, without limitation, for himself/herself or on behalf of any other person or entity as an employee, officer, director, partner, agent, consultant, shareholder, member, owner or otherwise), contact, solicit or attempt to solicit or accept unsolicited monitoring or alarm installation business from the Subscriber to whom such Contract related. Purchaser and Principal(s) agree(s) that the amount of damage resulting to Purchaser from a violation of this Section is difficult to ascertain and acknowledge that Purchaser shall be entitled to liquidated damages from the Principal who violated the covenant in ...

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