Prithvi Catalytic, Inc. v. Microsoft Corp. (In re Prithvi Catalytic, Inc.)

580 B.R. 652

IN RE: PRITHVI CATALYTIC, INC. n/k/a Abilius, Inc., Reorganized Debtor.

Prithvi Catalytic, Inc. n/k/a Abilius, Inc., Kyko Global, Inc., and Kyko Global GmbH, Plaintiffs,

v.Microsoft Corporation, Collabera, Inc., Beyondsoft Corporation, Ian Olson, and Shannon Krohn, Defendants.

Case No. 13–23855–GLT

Adv. Proc. No. 14–02176–GLT

United States Bankruptcy Court, W.D. Pennsylvania.

Signed December 29, 2017

Kathleen Goldman, Esq. and Jayson Macyda, Esq. on behalf of Prithvi Catalytic, Inc. n/k/a Abilius, Inc., Kyko Global Inc., and Kyko Global GMBH.

Richard J. Parks, Esq. and Wendy E. Lyon, Esq. on behalf of Microsoft Corporation

Lawrence Del Rossi, Esq. and Lynne Anne Anderson, Esq. on behalf of Collabera, Inc., Ian Olson, and Shannon Krohn

Alexander W. Saksen, Esq. and Christina Magulick, Esq. on behalf of Beyondsoft Corporation

MEMORANDUM OPINION

GREGORY L. TADDONIO, UNITED STATES BANKRUPTCY JUDGE

Before the Court are the (1) Motion for Judgment on the Pleadings Pursuant to Federal Rule of Bankruptcy Procedure 7012 and Federal Rule of Civil Procedure 12(c) filed by Defendant Beyondsoft Consulting Inc. ;¹ (2) Motion for Judgment on the Pleadings Pursuant to Federal Rule of Bankruptcy Procedure 7012 and Federal Rules of Civil Procedure 12(c), 12(b)(1) and 12(b)(6) , and Joinder to BeyondSoft's Motion for Judgment on the Pleadings filed by Defendants Collabera, Inc., Shannon Krohn, and Ian Olson;² (3) Joinder by Microsoft Corporation to the Motion for Judgment on the Pleadings Filed by Beyondsoft Consulting, Inc. ;³ and (4) Plaintiffs' Responses to the three Motions. For the following reasons, the Motions are GRANTED.

FACTUAL BACKGROUND

The parties are well acquainted with the background of this case and proceeding, and the Court will only present those facts necessary to understand the current dispute.⁴

The Reorganized Debtor, Abilius, Inc. ("Abilius"),⁵ was an information technology staffing company that deployed teams of highly skilled employees to work on projects at jobsites maintained by Abilius' customers. Before Abilius filed its bankruptcy petition, approximately 90 percent of its revenue derived from one client, Defendant Microsoft Corporation.

Two of Abilius' competitors in the information technology staffing industry were Defendants Beyondsoft Consulting, Inc. and Collabera, Inc.⁶ A primary focus of the dispute in this adversary proceeding is the alleged "poaching" of Abilius' employees by those two competitors and their subsequent reassignment to Microsoft projects as employees of those competitors.

Abilius, then known as PCI, filed a petition for bankruptcy relief on September 10, 2013, after Plaintiff Kyko Global, Inc. ("Kyko")⁷ obtained a $17 million judgment against it and several of its affiliates.⁸ From the onset of the bankruptcy proceeding, Kyko was active in the case and sought the appointment of a chapter 11 trustee.⁹ Kyko also filed a claim for $18,473,630.¹⁰

Abilius did not file a plan within 120 days of filing the petition. Pursuant to 11 U.S.C. § 1121(c), Kyko filed its own plan on February 12, 2014.¹¹ The Court confirmed Kyko's Second Amended Chapter 11 Plan for Prithvi Catalytic, Inc. (the "Confirmed Plan") on May 30, 2014.¹² Kyko acknowledged that the Effective Date of the Confirmed Plan occurred on June 26, 2014.¹³

Two provisions of the Confirmed Plan are relevant to the current dispute regarding the standing of Kyko in this adversary proceeding. According to § 4.3(A) of the Confirmed Plan, Kyko received 100 percent of the new equity in Abilius in exchange for a $100,000 reduction in its claim. The balance of Kyko's claim against Abilius was to be paid over a period of six years. And according to § 3.1(c), Kyko sought an allowed administrative claim for "fees and expenses incurred in connection with the Chapter 11 Case." As discussed below, the Court will strike this provision in § 3.1(c) of the Confirmed Plan by separate order as a scrivener's error.

Plaintiffs allege that the "lynchpin" of the Confirmed Plan was the retention and expansion of the Microsoft business. However, on May 17, 2014, shortly before plan confirmation, Abilius learned that its contract with Microsoft for the "Sharepoint Project" would not be renewed and instead future work had been awarded to Beyondsoft. On June 4, 2014, Microsoft informed Abilius that part of its contract for the "Mission Control" project would not be extended and was awarded to Collabera.

Immediately after confirmation, on June 2, 2014, the Court entered its Post–Confirmation Order and Notice of Deadlines .¹⁴ The Post–Confirmation Order set a 30–day deadline for filing all administrative claims under the plan.

Kyko submitted its Motion for Payment of Professional Fees and Expenses Based Upon Substantial Contribution seeking an administrative claim under section 503(b)(3)(D) for its "substantial contribution in connection with the chapter 11 case."¹⁵ After a hearing on the motion, the Court ordered a further supplement to "include the sum total of the fees (broken down by category) that it seeks to have paid by the estate as an administrative expense."¹⁶ The supplement to the motion was submitted on October 1, 2014, in which, among other items, Kyko sought an "administrative expense for substantial contribution to the plan and disclosure statement" of $108,721.75.¹⁷

On October 14, 2014, the Court granted Kyko's motion in part, finding that "Kyko's efforts related to the Plan made a substantial contribution to the Debtor's case and the projected recovery for creditors."¹⁸ Once again, however, the Court had to require a supplement from Kyko to submit "its invoices, broken down by category."¹⁹ Kyko submitted the requested information,²⁰ and the Court ultimately granted "an administrative expense claim in the amount of $137,608.25 based on the Plan Proponents' substantial contribution to this bankruptcy case."²¹

The Adversary Proceeding

Plaintiffs filed their complaint initiating this adversary proceeding on August 21, 2014. The complaint asserted ten counts. After the Court's rulings on the dismissal and summary judgment motions (see footnote 4), the following counts remain for adjudication:

Count 2: Tortious Interference with Contractual Relations against Krohn and Olson. Count 2 alleges that Krohn and Olson acted intentionally and improperly in their attempts to "poach" Abilius' employees. Collabera hired Krohn away from Abilius in December 2013 to manage its customer accounts (including the Microsoft account) in the Pacific Northwest. Olson joined Collabera in January 2014. Plaintiffs claim that both former Abilius' executives used improper means to lure the Abilius resources over to their new employer in conjunction with an overall effort to transfer the entirety of the CSS/Mission Control work to Collabera.

Count 3: Civil Conspiracy against Krohn, Olson, and Collabera. Count 3 alleges that Krohn, Olson, and Collabera agreed to commit the tortious actions described in Count 2. In retaining this count, the Court's summary judgment order observed that Collabera was not named in Count 2 but that it still might be liable under Count 3.

Count 5: Tortious Interference with Contractual Relations against Microsoft and Beyondsoft. Count 5 alleges that Microsoft and Beyondsoft acted intentionally and improperly by allegedly "poaching" Abilius' employees and shepherding them to equivalent positions at Beyondsoft.

Count 6: Civil Conspiracy against Microsoft and Beyondsoft. Count 6 alleges that Microsoft and Beyondsoft agreed to commit the tortious actions described in Count 5.

Count 9: Violation of the Automatic Stay and Count 10: Civil Contempt for Violation of the Automatic Stay against Microsoft, Collabera, Krohn, and Olson. In Count 9, Plaintiffs allege that the actions undertaken by Microsoft, Collabera, Krohn, and Olson in the other counts were intentional and occurred during a time when the automatic stay was in place. Count 10 alleges that Microsoft, Collabera, Krohn, and Olson should be held in civil contempt for violating the automatic stay order.

Beyondsoft, the Collabera Defendants, and Microsoft now move for judgment on the pleadings under Rule 7012 (incorporating Civil Rules 12(b)(1), 12(b)(6), 22 and 12(c) ). Defendants seek to dismiss Kyko as a plaintiff on all counts for failure to state a claim on which relief can be granted and that Kyko does not have constitutional, prudential, and/or statutory standing.

The issue is now ripe for adjudication. The Court has jurisdiction under 28 U.S.C. § 1334 and 157(b)(2)(A). Venue is proper in this Court pursuant to 28 U.S.C. § 1409(a).

ANALYSIS

Microsoft explicitly raises the question of the constitutional standing of Kyko in this adversary proceeding:

In addition to the analysis provided in BeyondSoft's Motion, Microsoft submits that the fundamental elements of standing and jurisdiction require the dismissal of Kyko's claims at this juncture. ... As more fully articulated in BeyondSoft's Motion, Kyko simply lacks an identifiable legal injury to provide it standing.²³

The Court is required to examine constitutional standing before other issues.²⁴

Article III of the Constitution limits the judicial power of the federal courts to particular "cases" or "controversies."²⁵ As the Supreme Court has observed, "[o]ne of the controlling elements in the definition of a case or controversy under Article III is standing."²⁶ The "irreducible constitutional minimum of standing" contains three elements, rooted in the assumption that the individual bringing a lawsuit has an injury-in-fact:

First, the plaintiff must have suffered an "injury in fact"—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) "actual or imminent, not ‘conjectural’ or ‘hypothetical[.]’ " Second, there must be a causal connection between the injury and the conduct complained of—the injury has to be "fairly ... trace[able] to the challenged action of the defendant, and not ... th[e] result [of] the independent

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