Mission Measurement Corp. v. Blackbaud, Inc.

MISSION MEASUREMENT CORPORATION, Plaintiff, v. BLACKBAUD, INC., et al., Defendants.

Case No. 16 C 6003

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

March 26, 2018

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, District Court Judge:

After the Court granted in part and denied in part Defendants' earlier-filed motions to dismiss,¹ Plaintiff Mission Measurement Corporation ("Mission Measurement") brought the present nine-count Third Amended Complaint against Defendants Blackbaud, Inc. ("Blackbaud"), MicroEdge, LLC ("MicroEdge"), Vista Equity Partners Management, LLC ("Vista Management"), VFF I AIV I, L.P. ("Vista I Fund"), VFF I AIV I-A, L.P. ("Vista I-A Fund"), Bregal Sagemount I, L.P. ("Sagemount"), and individual Defendants Todd Laddusaw, Preston McKenzie, Benny Melumad, Phil Montgomery, Kristin Nimsger, and Charles Vanek ("Individual Defendants") alleging violations of the Defend Trade Secrets Act of 2016 ("DTSA"), 18 U.S.C. § 1831, et seq., as well as state law claims, including an Illinois Trade Secrets Act ("ITSA") claim, 765 ILCS 1-65/1, et seq.

Before the Court is individual Defendants Laddusaw's and Melumad's motion to dismiss under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. Defendants Laddusaw, Melumad, as well as Vista I Fund and Vista I-A Fund (collectively "Vista Funds"),also seek to dismiss Plaintiff's state law tortious interference with contract and tortious interference with prospective economic advantage claims as alleged in Counts VII and VIII, as well as Plaintiff's unjust enrichment claim alleged in Count VI pursuant to Rule 12(b)(6).

For the following reasons, the Court denies Defendants' Rule 12(b)(2) motion because Plaintiff has fulfilled its burden of establishing a prima facie case of specific personal jurisdiction over Defendants Melumad and Laddusaw. The Court grants in part and denies in part Defendants' Rule 12(b)(6) motion. In particular, the Court grants Defendants' Rule 12(b)(6) motion as to the Vista Funds and dismisses the funds as Defendants from this lawsuit. Otherwise, the Court denies the remainder of Defendants' Rule 12(b)(6) motion.

LEGAL STANDARDS

I. Federal Rule of Civil Procedure 12(b)(2)

A motion to dismiss under Rule 12(b)(2) tests whether a federal court has personal jurisdiction over a defendant. See Fed. R. Civ. P. 12(b)(2); Wells Fargo Bank, N.A. v. Younan Prop., Inc., 737 F.3d 465, 467 (7th Cir. 2013). Although the "plaintiff bears the burden of establishing personal jurisdiction," Brook v. McCormley, 873 F.3d 549, 552 (7th Cir. 2017), when ruling on a Rule 12(b)(2) motion to dismiss based on the submission of written materials, a plaintiff need only make a prima facie case of personal jurisdiction. Northern Grain Mktg., LLC v. Greving, 743 F.3d 487, 491 (7th Cir. 2014). In analyzing a Rule 12(b)(2) motion without conducting an evidentiary hearing, courts accept the well-pleaded facts in the complaint as true. Felland v. Clifton, 682 F.3d 665, 672 (7th Cir. 2012).

II. Federal Rule of Civil Procedure 12(b)(6)

"A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the viability of a complaint by arguing that it fails to state a claim upon which relief may begranted." Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736 (7th Cir. 2014); see also Hill v. Serv. Emp. Int'l Union, 850 F.3d 861, 863 (7th Cir. 2017). Under Rule 8(a)(2), a complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Pursuant to the federal pleading standards, a plaintiff's "factual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). Put differently, a "complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (quoting Twombly, 550 U.S. at 570). When determining the sufficiency of a complaint under the plausibility standard, courts must "accept all well-pleaded facts as true and draw reasonable inferences in the plaintiffs' favor." Park Pet Shop, Inc. v. City of Chicago, 872 F.3d 495, 499 (7th Cir. 2017).

BACKGROUND

In its Third Amended Complaint, Mission Measurement alleges that it is the market leader in social sector data and insights relating to social change programs aimed at addressing issues such as poverty, hunger, access to healthcare, and climate change. (R. 119, Third Am. Compl. ¶ 30.) One of Mission Measurement's goals is to change the way non-profits, corporations, governments, and foundations invest in philanthropic endeavors by using data to measure and forecast social impact program outcomes. (Id.) Using data collected from social program evaluations, Mission Measurement has compiled a database of over 75,000 different data points, which it has categorized into approximately 130 social outcome types. (Id. ¶ 31.) Over the last decade, Mission Measurement has developed best practices and tools for the outcomes space, which includes a proprietary database, the Outcomes Taxonomy ^TM. (Id. ¶ 32.)

Defendant MicroEdge, a limited liability company organized under the laws of New York, is a provider of software solutions that automate the charitable giving process. (Id. ¶¶ 4, 33.) Vista Management is a limited liability company and investment firm that operates the private equity Vista Funds. (Id. ¶¶ 5, 33.) Vista Management acquired MicroEdge in 2009 and Vista Management, Sagemount, and the named Individual Defendants held investments in MicroEdge during the relevant time period. (Id. ¶ 33.)

Because Vista Management had significant concerns about obtaining a return on its investment in MicroEdge and wanted MicroEdge to innovate, MicroEdge - through Vista Management - sought out Mission Measurement to collaborate on outcomes related products. (Id. ¶ 36.) Specifically, because MicroEdge would soon be put up for sale, Vista Management and MicroEdge needed new products to increase the enterprise value for the sale. (Id.) To that end, MicroEdge negotiated an agreement with Mission Measurement to jointly develop outcomes related products. (Id. ¶ 38.) Nevertheless, despite MicroEdge's representations, Mission Measurement alleges that MicroEdge failed to act in good faith in negotiating an agreement, but instead - with the other Defendants - embarked on an intentional and consistent strategy of delay and obfuscation for the purpose of keeping Mission Measurement out of the market as a competitor for outcomes related products and services. (Id. ¶ 62.)

Mission Measurement further alleges that Vista Management, Sagemount, and the Individual Defendants manipulated the sale price of MicroEdge - using the relationship with Mission Measurement, its confidential information, and its market position - to advance their own personal economic benefit. (Id. ¶ 74.) Due to the sale of MicroEdge to Defendant Blackbaud, the Individual Defendants, the Vista Defendants, and Sagemount received direct financial benefits. (Id.) In addition, following Blackbaud's acquisition of MicroEdge,Blackbaud initiated development of its own outcomes product using a team of both Blackbaud and MicroEdge employees, including some of the individuals who were involved in the Mission Measurement-MicroEdge relationship. (Id. ¶ 75.)

ANALYSIS

I. Personal Jurisdiction

Defendants Laddusaw and Melumad first challenge the Court's personal jurisdiction over them. The Defend Trade Secrets Act does not have nationwide service of process that would confer personal jurisdiction over all Defendants, therefore, the Court may exercise personal jurisdiction over Defendants only if personal jurisdiction would be proper in an Illinois court. See Advanced Tactical Ordnance Sys., LLC v. Real Action Paintball, Inc., 751 F.3d 796, 800 (7th Cir. 2014); Fed.R.Civ.P. 4(k)(1)(C). "Illinois's long-arm statute permits its courts to exercise personal jurisdiction to the fullest extent allowed by the Illinois and U.S. Constitutions." KM Enter., Inc. v. Glob. Traffic Techs., Inc., 725 F.3d 718, 732 (7th Cir. 2013). "Because Illinois permits personal jurisdiction if it would be authorized by either the Illinois Constitution or the United States Constitution, the state statutory and federal constitutional requirements merge." uBID, Inc. v. GoDaddy Grp., Inc., 623 F.3d 421, 425 (7th Cir. 2010); see also Northern Grain Mktg., 743 F.3d at 492 ("the statutory question merges with the constitutional one - if Illinois constitutionally may exercise personal jurisdiction over a defendant, its long-arm statute will enable it to do so.").

Mission Measurement contends that it can establish personal jurisdiction over Defendants Laddusaw and Melumad based on specific jurisdiction - which grows out of "the relationship among the defendant, the forum, and the litigation." Walden v. Fiore, 134 S.Ct. 1115, 1121 (2014). The primary focus of the Court's specific jurisdiction inquiry is the non-residentDefendants' relationship with Illinois. Bristol-Myers Squibb Co. v. Superior Court of Ca., San Francisco Cnty., 137 S. Ct. 1773, 1779 (2017). In particular, "specific jurisdiction 'refers to jurisdiction over a defendant in a suit arising out of or related to the defendant's contacts with the forum.'" Brook, 873 F.3d at 552 (citation omitted). "Only intentional contacts by the defendant with the forum jurisdiction can support specific jurisdiction." Noboa v. Barcelo Corporacion Empresarial, SA, 812 F.3d 571, 572 (7th Cir. 2016).

A. Individual Defendants

In response to the present Rule 12(b)(2) motion, Mission Measurement argues that the Court has specific jurisdiction over former MicroEdge employees Laddusaw and Melumad because they purposefully and intentionally directed their efforts toward Mission Measurement in Illinois to advance...