Veteran Payment Sys., LLC v. Gossage

VETERAN PAYMENT SYSTEMS, LLC, PLAINTIFF, v. TIMOTHY A. GOSSAGE, et al., DEFENDANTS.

CASE NO. 5:14CV981

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION

February 10, 2015

JUDGE SARA LIOI

MEMORANDUM OPINION AND ORDER

On March 28, 2014, plaintiff Veteran Payment Systems, LLC ("plaintiff" or "Veteran") filed the above-captioned action in the Stark County Court of Common Pleas against defendants, Timothy A. Gossage ("Gossage") and Mainstream Merchant Services, Inc. ("Mainstream"). (Doc. No. 1-1 ["Compl."].) All of plaintiff's claims relate, in one way or another, to the restrictive covenant Gossage purportedly became subject to during his employment with Veteran. Mainstream removed the action to this Court, on diversity grounds, on May 6, 2014.

The parties have filed a series of motions that are currently before the Court: (1) Mainstream's motion to dismiss for lack of personal jurisdiction (Doc. No. 4 ["Mainstream's Mot."]); (2) Gossage's motion to dismiss for want of personal jurisdiction (Doc. No. 8 ["Gossage's Mot."]); and (3) Veteran's motion to transfer venue (Doc. No. 13 ["Veteran's Mot."]). Veteran has filed an opposition brief to each defendant's motion (Doc. No. 9 ["Veteran's Opp'n to Mainstream's Mot."]; Doc. No. 12["Veteran's Opp'n to Gossage's Mot."]), and Mainstream has filed a reply. (Doc. No. 10 ["Mainstream's Reply"].) Additionally, Mainstream has responded to Veteran's motion (Doc. No. 14 [Mainstream's Resp. to Veteran's Mot."]).

I. BACKGROUND

Veteran "is a Delaware limited liability company with its business office . . . in Alliance, Stark County, Ohio[]" and is "in the business of providing credit card processing services for merchants." (Compl. ¶ 2.) Mainstream is "a foreign corporation with its principal office" in Alpharetta, Georgia and is also "in the business of providing merchants with services to process credit card transactions." (Id. ¶ 4.) Gossage is a private citizen and "a resident of North Carolina[.]" (Id. ¶ 3.)

According to the complaint, on April 26, 2011, Gossage "entered into an Area Manager Employment Agreement" with Veteran that governed various aspects of Gossage's employment and the treatment of Veteran's confidential information. (Id. ¶ 7, Ex. 1 ["employment agreement"].) The employment agreement provided, in part, that, for a period of three years after the termination of his employment, Gossage was not to divert any business from Veteran "with any customer with whom Gossage had contact while employed by" Veteran, and that, for a period of two years after his separation, he was not to solicit any of Veteran's customers. (Id. ¶ 10.)

Particularly relevant to the pending motions, the employment agreement contained a forum selection clause that provided:

Interpretation and Jurisdiction. This Agreement shall be exclusively governed by and construed according to the laws of the State of Ohio. The parties agree that any action or proceeding, whether in law or in equity, brought under this Agreement or for a cause of action arising under this Agreement, shall only be brought in the appropriate state or federal courtsof the County of Alliance, Ohio, which courts shall have exclusive jurisdiction to hear such matters. The parties waive, to the fullest extent they may do so, the defense of forum non conveniens.

(Employment agreement at 37, bolding in original.)¹

Veteran "terminated Gossage from employment 'for cause' by on or about June 5, 2013 based upon Gossage's failure and refusal after request" to return to Veteran certain confidential information. (Compl. ¶¶ 11-12.) Veteran now claims that, "[s]ince the termination of his employment, Gossage had breached" the employment agreement by "failing to protect and by using" Veteran's confidential information "to pursue self-serving business relationships" with Veteran's merchants, "failing and refusing to return" to Veteran its confidential information, and by "soliciting and diverting [Veteran's] customers with whom Gossage had contact with while employed by" Veteran. (Id. ¶ 13.) With respect to Mainstream, Gossage's new employer, Veteran alleges that it "intentionally and wrongfully employed Gossage and participated with Gossage to solicit and divert [Veteran's] merchants for the self-serving purpose to deprive [Veteran] of a contractual right to a revenue stream" that would have flowed from the processing of these merchants' credit card transactions. (Id. ¶¶ 14, 36.) Veteran raises claims for breach of contract (restrictive covenant) against Gossage, and wrongful interference with contract (willful misconduct) and unjust enrichment against Mainstream. Veteran also seeks an accounting, disgorgement of profits from Mainstream, and injunctive relief.

Mainstream has moved to dismiss the complaint, maintaining that this Court lacks personal jurisdiction over it. While acknowledging some "limited contactswith Ohio" and the servicing of "a limited number of accounts in Ohio," Mainstream underscores the fact that "plaintiff's claims do not arise out of those contacts." (Mainstream's Mot. at 75.) It further argues that the forum selection clause, contained in Gossage's employment agreement, cannot be used to manufacture jurisdiction against it, a non-party to the agreement. (Mainstream's Reply at 243-45.) According to Mainstream, "the only connection this case has to the State of Ohio is the fact that Gossage was previously employed by plaintiff, an Ohio company, and it is convenient for Veteran to litigate here." (Mainstream's Mot. at 73.)

Pro se defendant Gossage has also moved to dismiss on personal jurisdiction grounds. Gossage acknowledges the existence of the forum selection clause in the employment agreement, but he discounts it, explaining that he "do[es] not recall having any understanding of this clause when [he] signed the contract. In reading it now, [he] do[es] not understand that clause to be an agreement on [his] part that the courts in Ohio will have personal jurisdiction over [him]." (Doc. No. 8-1 [Gossage Decl.] at 202.) In a sworn affidavit appended to his motion, Gossage also avers, in part, that he is "not able financially to defend this lawsuit in Ohio based on the expense of travel alone." (Id.)

In response to Gossage's dispositive motion, Veteran filed a motion, pursuant to 28 U.S.C. § 1404(a), to transfer this action to the United States District Court for the Middle District of North Carolina—Greensboro. It is Veteran's position that Gossage's complaints regarding the expense and inconvenience of defending an action in this judicial district "sound as a motion to dismiss or transfer for forum non conveniens." (Veteran's Mot. at 354, italics in original.) Veteran insists that a § 1404(a) transfer to the district court in Greensboro, North Carolina will resolve Gossage's concerns about theinconvenience of litigating this matter so far from home, while providing a forum where personal jurisdiction clearly exists as to Mainstream. (Id. at 356-60.)

"Mainstream does not oppose a transfer of venue, but for reasons different than set forth" by Veteran. (Mainstream's Resp. to Veteran's Mot. at 378.) Because it believes that this Court cannot exercise personal jurisdiction over it, Mainstream argues that § 1404(a) cannot be used to effectuate the transfer. Instead, Mainstream suggests that the Court must look to 28 U.S.C. §§ 1406(a) or 1631. (Id. at 379.) Thus, the parties agree that a transfer is advisable, but simply disagree as to the proper statutory vehicle.

II. ANALYSIS

The authority to transfer venue lies in 28 U.S.C. §§ 1404(a) and 1406(a). Section 1404(a) permits a transfer to any district where the case could have been brought originally for "the convenience of parties and witnesses" and in the "interest of justice[.]" Section 1406(a) also enables a district court to transfer venue "in the interest of justice" when venue is improper in the original forum to "any district or division in which it could have been brought." While a transfer under § 1404(a) may not be granted when a court lacks jurisdiction over a defendant, Pittock v. Otis Elevator Co., 8 F.3d 325, 329 (6th Cir. 1993) (citing Martin v. Stokes, 623 F.2d 469, 474 (6th Cir. 1980)), § 1406(a) does not require a district court to have personal jurisdiction over the defendants before transferring the case. See Flynn v. Greg Anthony Constr. Co., Inc., 95 F. App'x 726, 739 (6th Cir. 2003); Martin v. Stokes, 623 F.2d 469, 471 (6th Cir. 1980); see, e.g., Goldlawr, Inc. v. Heiman, 369 U.S. 463, 82 S. Ct. 913, 8 L. Ed. 2d 39 (1962).

"Thus, the existence of personal jurisdiction over a defendant, or lack thereof, determines the proper statute under which a court may grant a transfer of venue."Global Crossing Telecomm., Inc. v. World Connection Grp, Inc., 287 F. Supp. 2d 760, 764 (E.D. Mich. 2003). Consequently, the Court must ascertain whether it can exercise jurisdiction over defendants before it can determine whether transfer is appropriate. See Leroy v. Great W. United Corp., 443 U.S. 173, 180, 99 S. Ct. 2710, 61 L. Ed. 2d 464 (1979) ("The question of personal jurisdiction, which goes to the court's power to exercise control over the parties, is typically decided in advance of venue, which is primarily a matter of choosing a convenient forum."); see generally Martin, 623 F.2d at 474 ("The law in this Circuit, therefore, is that § 1406(a) provides the basis for any transfer made for the purpose of avoiding an obstacle to adjudication on the merits in the district court where the action was originally brought. That defect may be either improper venue or lack of personal jurisdiction. This construction of § 1406(a) necessarily limits the application of § 1404(a) to the transfer of actions commenced in a district court where both personal jurisdiction and venue are proper."); see, e.g., Costaras v. NBC Universal, Inc., 409 F. Supp. 2d 897 (N.D. Ohio 2005) (addressing personal jurisdiction before venue).

A. Personal Jurisdiction over Defendan...