Homeschool Buyers Club, Inc. v. Brave Writer, LLC

HOMESCHOOL BUYERS CLUB, INC., Plaintiff, v. BRAVE WRITER, LLC, Defendant.

19-CV-6046 (VSB)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

March 11, 2020

OPINION & ORDER

Appearances:

Craig S. Tarasoff

Jared B. Foley

David S. Douglas

Gallet Dreyer & Berkey, LLP

New York, NY

Counsel for Plaintiff

Christine M. Haaker

Thompson Hine LLP

Columbus, OH

Emily Joy Mathieu

Thompson Hine LLP

New York, NY

Sean P. McCormick

Thompson Hine LLP

Miamisburg, OH

Counsel for Defendant

VERNON S. BRODERICK, United States District Judge:

Plaintiff Homeschool Buyers Club, Inc. filed this action on June 28, 2019, (Doc. 1), alleging ten causes of action arising from Defendant Brave Writer, LLC's alleged misappropriation of Plaintiff's proprietary customer information, and further filed a motion for a preliminary injunction on August 9, 2019, (Doc. 12). Defendant Brave Writer, LLC moved to dismiss Plaintiff's complaint on August 12, 2019, (Doc. 16), and opposed Plaintiff's motion for a preliminary injunction on September 17, 2019, (Doc. 30). Because this court cannot exercise personal jurisdiction over Brave Writer, LLC, Defendant's motion to dismiss is GRANTED, Plaintiff's motion for a preliminary injunction is DENIED, and this case is dismissed without prejudice.

I. Factual Background¹

Plaintiff Homeschool Buyers Club, Inc. ("Plaintiff") is a corporation established under the laws of the state of California. (Compl. ¶ 5.)² Plaintiff is an online seller of homeschool curricula and services to homeschooling families, and operates as a cooperative that pools the purchasing power of its customer members in order to negotiate discounted prices from major educational publishers and homeschooling product vendors. (Id. ¶ 7.) Plaintiff currently has approximately 250,000 customer members located throughout the United States and abroad. (Id.) Plaintiff alleges that its customer members are the "lifeblood of its business," and "[a]bsent such customer members, [Plaintiff] would not be able to negotiate substantial discounts . . . and would cease to be a viable business operation." (Id. ¶ 8.) Accordingly, Plaintiff takes significant steps to protect its membership information, including by keeping confidential the identities ofits members and their contact information, which Plaintiff asserts cannot be easily discerned through readily available public information. (Id.) Plaintiff alleges that it assures its members that it will not use their contact information "for anything other than bringing them the best homeschool curriculum values." (Id. ¶ 9.)

Defendant Brave Writer, LLC ("Defendant") is a limited liability company established under the laws of the state of Ohio with its principal place of business in Ohio. (Id. ¶ 6.) Julie Sweeney—also known as Julie Bogart, (Sweeney Decl. ¶ 1)³—is a citizen and resident of the State of Ohio, and is the sole member of Defendant. (Compl. ¶ 6.) Defendant is a provider of educational materials and courses designed to improve children's writing skills. (Id. ¶ 10.) Since 2010, Defendant has been a vendor of products for Plaintiff, and Plaintiff has offered Defendant's products to its customers on its website. (Id.)

On March [Redacted] 2017, Plaintiff and Defendant entered into a business agreement over email. (Sweeney Decl. Ex. C; Compl. ¶ 11.) The agreement states that Plaintiff [Redacted] (Sweeney Decl. Ex. C, at 1; Compl. ¶ 12.) The agreement states that Plaintiff [Redacted] (Sweeney Decl. Ex. C, at 2; Compl. ¶ 13.) The agreement [Redacted] (Sweeney Decl. Ex. C, at 2; Compl. ¶ 14.) The agreement also includes [Redacted](Sweeney Decl. Ex. C, at 3; Compl. ¶ 15.) [Redacted] (Sweeney Decl. Ex. C, at 3; Compl. ¶ 16.) The agreement also states that [Redacted] (Sweeney Decl. Ex. C, at 3; Compl. ¶ 17.)

After execution of the agreement, the parties continued with their relationship in accordance with the agreement and their prior course of dealing, to both parties' profit. (Compl. ¶¶ 18-19.) For example, in 2018, purchases of Defendant's products by Plaintiff's members generated approximately $200,000 of gross sales and approximately $90,000 of profit for Defendant. (Id. ¶ 19.) However, by letter dated May 21, 2019, Defendant purported to terminate Plaintiff's rights to distribute, sell, or promote Defendant's products effective as of May 28, 2019. (Id. ¶ 20.) Plaintiff alleges that following receipt of this letter, Plaintiff attempted to preserve its rights and ascertain why Defendant wished to terminate the parties' relationship. (Id. ¶ 22.) Plaintiff communicated with Defendant's counsel, and alleges that "[d]uring the course of such communications, it became apparent that the motivation for [Defendant's] actions was its intention to compete with [Plaintiff], including through unlawful utilization of [Plaintiff's] confidential and proprietary customer information." (Id. ¶¶ 22-23.) Plaintiff alleges that during such communications, Plaintiff demanded that Defendant remove all information concerning Plaintiff's members from its servers, which Defendants refused to do. (Id. ¶ 24-25.) Plaintiff alleges that Defendant "admitted that it intended to utilize [Plaintiff's] proprietary customer information as a means to circumvent the terms of the [parties'] Agreement and directly competewith [Plaintiff], indicating that it viewed [Plaintiff's] customer information as a means to 'grow [Defendant's] own audience.'" (Id. ¶ 25.)

Plaintiff contends that Defendant now has information pertaining to over ten thousand of Plaintiff's customer members, which Defendant is misappropriating for unlawful purposes in violation of Plaintiff's rights, causing Plaintiff harm. (Id. ¶¶ 26-30.)

II. Procedural History

Plaintiff filed the complaint in this action on June 28, 2019. (Doc. 1.) Plaintiff's complaint alleges ten causes of action, including (i) violations of the Defend Trade Secrets Act ("DTSA"), 18 U.S.C. § 1831, et seq.; (ii) unfair competition; (iii) misappropriation of confidential information; (iv) theft of corporate opportunities; (v) tortious interference with actual and prospective business relationships; (vi) conversion; (vii) unjust enrichment, money had and received, and constructive trust; (viii) breach of contract; (ix) breach of duty of good faith and fair dealing; and (x) injunctive relief. On August 9, 2019, Plaintiff filed a motion for a preliminary injunction supported by a memorandum of law and an affidavit with exhibits. (Docs. 12-14.) On August 12, 2019, Defendant moved to dismiss Plaintiff's complaint, and filed a memorandum of law in support of its motion, and a declaration with exhibits. (Docs. 16-21.) On September 13, 2019, Plaintiff filed a memorandum of law in opposition to Defendant's motion to dismiss, as well as an affidavit. (Docs. 27-28.) Defendant opposed Plaintiff's motion for a preliminary injunction on September 17, 2019 by filing a memorandum of law in opposition, and two supporting declarations with exhibits. (Docs. 25, 30-31). On September 27, 2019, Defendant filed a reply memorandum of law in support of its motion to dismiss, and a supporting declaration. (Docs. 33-34.) Finally, also on September 27, Plaintiff filed a reply memorandum of law in support of its motion for a preliminary injunction, and two affidavits.(Docs. 35-37.)

III. Legal Standards

"[A] federal court generally may not rule on the merits of a case without first determining that it has jurisdiction over the category of claim in suit (subject-matter jurisdiction) and the parties (personal jurisdiction)." Sinochem Int'l Co. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 430-31 (2007) (citing Steel Co. v. Citizens For A Better Environment, 523 U.S. 83, 93-102 (1998)).⁴ On a motion to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2), the "plaintiff bears the burden of demonstrating personal jurisdiction over a person or entity against whom it seeks to bring suit." Penguin Grp. (USA) Inc. v. Am. Buddha, 609 F.3d 30, 34 (2d Cir. 2010) (citing In re Magnetic Audiotape Antitrust Litig., 334 F.3d 204, 206 (2d Cir. 2003) (per curiam)); see also Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999) ("When responding to a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing that the court has jurisdiction over the defendant."). To defeat a jurisdiction-testing motion, the plaintiff's burden of proof "'varies depending on the procedural posture of the litigation.'" Dorchester Fin. Sec., Inc. v. Banco BRJ, S.A., 722 F.3d 81, 84 (2d Cir. 2013) (quoting Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990)). At the pleading stage a plaintiff need only make a prima facie showing that jurisdiction exists, and that showing may be established solely by allegations. Id. at 84-85; see also Eades v. Kennedy, PC Law Offices, 799 F.3d 161, 167-68 (2d Cir. 2015) ("'In order to survive a motion to dismiss for lack of personal jurisdiction, a plaintiff must make a prima facie showing that jurisdiction exists.'" (quoting Licci ex rel. Licci v. Lebanese CanadianBank, SAL, 732 F.3d 161, 167-68 (2d Cir. 2013))).

Courts may rely on materials outside the pleadings in considering a motion to dismiss for lack of personal jurisdiction. See DiStefano v. Carozzi N. Am., Inc., 286 F.3d 81, 84 (2d Cir. 2001). If the court considers pleadings and affidavits submitted by the parties, the plaintiff's prima facie showing "must include an averment of facts that, if credited by the ultimate trier of fact, would suffice to establish jurisdiction over the defendant." In re Terrorist Attacks on Sept. 11, 2001, 714 F.3d 659, 673 (2d Cir. 2013) (quoting Chloé v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 163 (2d Cir. 2010)). "'The allegations in the complaint must be taken as true to the extent they are uncontroverted by the defendant's affidavits.'" MacDermid, Inc. v. Deiter, 702 F.3d 725, 727 (2d Cir. 2012) (quoting Seetransport Wiking Trader...