Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

ECL Group, LLC v. Mass

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

February 20, 2018

TROY MASS, Defendant.



         In this removed action, plaintiffs ECL Group (“ECL”) and IO Practiceware, Inc. (“IOPW”) move to remand, and defendant Troy Mass. (“Mass”) moves for an opinion on choice of law, dismissal or transfer, dissolution of a state court temporary restraining order (“TRO”), and a briefing schedule on attorney's fees and other relief. For the reasons that follow, the court denies the motion to remand; grants Mass's motion for an opinion on choice of law to the extent of holding that California law applies; denies Mass's motion for dismissal or transfer; denies as moot Mass's motion for dissolution of the state court TRO (which has already expired); and denies without prejudice Mass's motion for a briefing schedule on attorney's fees and other relief.

         I Mass. is a former top sales representative for ECL and IOPW, affiliated entities that offer software, practice management systems, and other services to ophthalmology and optometry offices. In June 2016 Mass. signed an Employment, Confidentiality, Non- Solicitation and Non-Competition Agreement (“Employment Agreement”) with ECL.[1] The Employment Agreement contains a Texas choice-of-law provision[2] and a Texas forum selection clause.[3] It also includes a noncompetition provision that states, in pertinent part:

(a) Noncompetition. For the duration of the Term of Employment and for two years thereafter (“Restricted Period”), Employee will not, directly or indirectly, in any capacity whatsoever, individually or on behalf of any other person or entity, engage in, own, manage, operate, finance, control, or participate in the ownership, management operation, financing or control of, be employed by, associated with, or in any manner connected with, lend the Employee's name or any similar name to, lend the Employee's credit to or render services or advice to, any business engaged or about to become engaged in the Business of the Employer, or any of its Affiliates in the Market Area.

Emp. Agmt. ¶ 4.2(a) (first italics in original; second italics underlined in original). And it contains a confidentiality provision:

Employee will hold in strictest confidence the Confidential Information and will not disclose it to any Person, except with the specific prior written consent of the Employer or as may be required by court order, law, government agencies or parties with which the Employer deals in the ordinary course of its business, or except as otherwise expressly permitted by the terms of this Agreement. The Employee will hold the Confidential Information in strictest confidence permanently and without any time limitation.

Emp. Agmt. ¶ 3.3(a).

         This lawsuit arises from Mass's decision to leave his position with ECL and IOPW and join a direct competitor, Nextech Systems, LLC (“Nextech”). Before departing ECL and IOPW, Mass. attended ECL and IOPW's national sales conference, an annual event where sales representatives learn about the companies' most recent confidential information and trade secrets. At the time the conference was held, Mass. knew that he would begin work at Nextech the following week. After hearing rumors that Mass. intended to gather confidential information from the conference for the benefit of Nextech, ECL and IOPW terminated Mass's employment. Mass. began working for Nextech in August 2017, but he maintains that he is currently unemployed.

         Shortly after Mass. started working for Nextech, ECL and IOPW brought this lawsuit in Texas state court, alleging causes of action for common law breach of contract, breach of fiduciary duty, defamation, and misappropriation of trade secrets. They based their claims on Mass's access to confidential information and trade secrets through his Sales Representative position.[4] The state court petition did not specify the amount of monetary damages that ECL and IOPW sought, aside from this allegation: “[p]ursuant to Tex.R.Civ.P. 47(c)(2) Plaintiffs seek monetary relief of $100, 000 or less and non-monetary relief.” Pet. ¶ 2.

         Mass timely removed the case to this court based on federal question jurisdiction, under 28 U.S.C. § 1331, and based on diversity jurisdiction, under 28 U.S.C. § 1332. Section 1332(a)(1) provides that the district court “shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between . . . citizens of different States[.]”

         Before the case was removed, ECL and IOPW obtained a TRO against Mass. from the Texas state court on August 31, 2017, which the court later extended through September 28, 2017. ECL and IOPW also applied to the state court for a temporary injunction (“preliminary injunction”). After the case was removed, this court entered a preliminary injunction application scheduling order and an order allowing expedited discovery. The parties are currently conducting discovery related to the preliminary injunction application. The state court TRO has expired under its own terms.

         ECL and IOPW move to remand the case to state court. Mass. opposes the motion and moves for an opinion on choice of law; dismissal or transfer of the case; dissolution of the state court TRO; and a briefing schedule on attorney's fees and other relief and brief in support.


         The court first addresses ECL and IOPW's motion to remand. It need only decide whether it can exercise diversity jurisdiction.[5]


         As the removing party, Mass. “has the burden of overcoming an initial presumption against jurisdiction and establishing that removal is proper.” Carnes v. Data Return, L.L.C., 2005 WL 265167, at *1 (N.D. Tex. Feb.1, 2005) (Fitzwater, J.) (citing Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001)). “In general, defendants may remove a civil action if a federal court would have had original jurisdiction.” De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th Cir. 1995) (citing 28 U.S.C. § 1441(a)). “Due regard for the rightful independence of state governments, which should actuate federal courts, requires that they scrupulously confine their own jurisdiction to the precise limits which (a federal) statute has defined.” Victory Carriers, Inc. v. Law, 404 U.S. 202, 212 (1971) (quoting Healy v. Ratta, 292 U.S. 263, 270 (1934)). “The federal removal statute, 28 U.S.C. § 1441, is subject to strict construction because a defendant's use of that statute deprives a state court of a case properly before it and thereby implicates important federalism concerns.” Frank v. Bear Stearns & Co., 128 F.3d 919, 922 (5th Cir. 1997) (citing Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 365 (5th Cir. 1995)). “[D]oubts regarding whether removal jurisdiction is proper should be resolved against federal jurisdiction.” Acuna v. Brown & Root Inc., 200 F.3d 335, 339 (5th Cir. 2000).


         Both sides agree that the parties are diverse citizens. Plaintiffs move to remand on the ground that Mass. has neither asserted nor established that the amount in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs.

         If the plaintiffs' state court petition demands monetary relief of a stated sum, that sum, if asserted in good faith, is deemed to be the amount in controversy. Dart Cherokee Basin Operating Co. v. Owens, ___ U.S. ___, 135 S.Ct. 547, 551 (2014). But when, as here, the plaintiffs' state court petition does not demand relief of a stated sum, the defendants' notice of removal must make “a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” Id. at 554. No evidence is required unless and until the plaintiff contests, or the court questions, the allegation. See id. at 551, 554.

         If the plaintiffs contest the allegation, then the defendant must prove by a preponderance of the evidence that the amount in controversy requirement has been satisfied. Id. at 554 (explaining that, if plaintiff contests defendant's allegation, then “both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied”); see also Allee Corp. v. Reynolds & Reynolds Co., 2015 WL 1914663, at *3 (N.D. Tex. Apr. 28, 2015) (Fitzwater, J.). The defendant's burden “is met if (1) it is apparent from the face of the petition that the claims are likely to exceed $75, 000, or, alternatively, (2) the defendant sets forth summary judgment type evidence of facts in controversy that support a finding of the requisite amount.” Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002) (internal quotation marks omitted). If the defendant can produce evidence sufficient to show by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional threshold, the plaintiffs can defeat diversity jurisdiction only by showing to a legal certainty that the amount in controversy does not exceed the sum or value of $75, 000, exclusive of interest and costs. See De Aguilar, 47 F.3d at 1412.


         In the present case, it is not apparent from the face of the petition that the amount in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs. The court must therefore decide whether Mass. has demonstrated by a preponderance of evidence that the amount in controversy requirement is met. Plaintiffs maintain that Mass. has not established an amount in controversy in excess of the threshold amount of $75, 000. They maintain that Mass. cannot include the value of trade secrets or his salary when calculating the amount in controversy. They also contend that Mass. has not shown that the amount in controversy, when including attorney's fees, exceeds the $75, 000 threshold.

         The court will assume arguendo that the value of ECL and IOPW's confidential information and trade secrets, breach of contract damages, attorney's fees, and defamation damages are not to be factored into the determination of the amount in controversy. Even so, Mass. has shown by a preponderance of evidence that the value alone of enjoining his competitive activity exceeds the jurisdictional threshold.

         Plaintiffs' state court petition seeks injunctive relief based on claims for breach of contract, misappropriation, and breach of fiduciary duty.[6] “In actions seeking declaratory or injunctive relief, it is well established that the amount in controversy is measured by the value of the object of the litigation.” Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 333, 347 (1977); see also Farkas v. GMAC Mortg., L.L.C., 737 F.3d 338, 341 (5th Cir. 2013) (per curiam); Garcia v. Koch Oil Co. of Tex. Inc., 351 F.3d 636, 640 (5th Cir. 2003). When determining whether to confer federal jurisdiction, the court considers “the value of the plaintiff's right sought to be enforced.” Garcia, 351 F.3d at 639 (citing Alfonso v. Hillsborough Cnty. Aviation Auth., 308 F.2d 724, 727 (5th Cir. 1962) (declining to assess defendants' loss because “[t]he value to the plaintiff of the right to be enforced or protected determines the amount in controversy”)).

When a business is threatened . . . by breach of a covenant not to compete-the stated rule is that the amount in controversy in an action for injunctive or declaratory relief is the difference between the value of the business . . . with the covenant, and its value . . . subject to the breach of the covenant.

Brand Energy Sols., LLC v. Rakocy, 2016 WL 7476221, at *3 (E.D. La. Dec. 29, 2016) (citing 14AA Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3708 (4th ed. 2016)). In the case of injunction against uncertain sales activity, courts typically look to “the profits earned by the employer on business generated by the employee during the period immediately preceding his termination.” 14AA Wright & Miller, supra, § 3708 (citing Zep Mfg. Corp. v. Haber, 202 F.Supp. 847 (S.D. Tex. 1962)).[7]

         Here, plaintiffs do not contest Mass's assertion that he generated around $1 million in sales for ECL during his year at the company.[8] Assuming the same rate of sales, and based on the two-year duration of the noncompete clause, ECL and IOPW will lose about $2 million in sales. Although neither ECL nor IOPW specifies the profit margins at which ECL and IOPW operate, “[t]he Fifth Circuit follows a common sense approach to determine whether the defendant has met its burden with respect to the amount in controversy.” A & C Disc. Pharmacy, L.L.C. v. Caremark, L.L.C., 2016 WL 3126237, at *4 (N.D. Tex. June 3, 2016) (Fitzwater, J.) (citing Robertson v. Exxon Mobil Corp., 814 F.3d 236, 240-41 (5th Cir. 2015)) (concluding that defendants offered evidence that satisfied their burden of establishing that at least one plaintiff's claim exceeded $75, 000, because defendants' evidence showed each plaintiff's specific harms, and “common sense dictat[ed]” that some of the harms-such as one plaintiff's alleged emphysema and the wrongful death of her husband, and another plaintiff's alleged prostate cancer-placed more than $75, 000 at stake); Allen v. R & H Oil & Gas Co., 63 F.3d 1326, 1336 (5th Cir. 1995) (“A court, in applying only common sense, would find that if the plaintiffs were successful in their punitive damages claim, they would collect more than $50, 000.”); Griffin v. HSBC Bank USA, 2010 WL 4781297, at *3 (N.D. Tex. Nov. 24, 2010) (Lindsay, J.) (explaining that, because plaintiff sought an order rescinding foreclosure and restoring title of the property to her, the value of the property was to be used in determining the amount in controversy, and concluding that “a common-sense analysis and approach establish[ed] that the sum of [value of the property, additional damages, and attorney's fees] [was] more likely than not to exceed the jurisdictional threshold”)). Common sense dictates that ECL and IOPW would realize at least a 4% profit ($80, 000) on $2 million in sales, which would satisfy the amount in controversy. See A & C Disc. Pharmacy, L.L.C., 2016 WL 3126237, at *4 (applying same method to calculate profit). Based on the record, the court finds that Mass. has shown by a preponderance of evidence that the amount in controversy exceeds the jurisdictional threshold.[9]


         The burden now shifts to ECL and IOPW to show to a legal certainty that they cannot recover in excess of the jurisdictional threshold.

         ECL and IOPW stipulate in their motion to remand that their damages do not exceed the sum of $74, 999.00. In determining the amount in controversy, the court must evaluate the jurisdictional facts “as of the time the complaint is filed; subsequent events cannot serve to deprive the court of jurisdiction once it has attached.” Ford v. United Parcel Serv., Inc. (Ohio), 2014 WL 4105965, at *4 (N.D. Tex. Aug. 21, 2014) (Fitzwater, C.J.) (citing St. Paul Reinsurance Co. v. Greenberg, 134 F.3d 1250, 1253-54 (5th Cir. 1998)). Because ECL and IOPW failed to limit their recovery to the jurisdictional threshold in their original petition and instead stipulated to limited recovery in their motion to remand, the court cannot consider their stipulation as a jurisdictional fact precluding removal. The Fifth Circuit does consider post-removal affidavits that clarify a petition that has previously left the jurisdictional question ambiguous. See Asociacion Nacional de Pescadores a PequenaEscala O Artesanales de Colombia (ANPAC) v. Dow Quimica de Colombia S.A., 988 F.2d 559, 565 (5th Cir. 1993), abrogated on other grounds by Marathon Oil Co. v. Ruhrgas, 145 F.3d 211 (5th Cir. 1998) (“Under those circumstances, the court is still examining the jurisdictional facts as of the time the case is removed, but the court is considering information submitted after removal.”). But in this case, there is no such ambiguity. Therefore, the court will not consider plaintiffs' stipulation as evidence of the amount in ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.