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Oceanside Ten Holdings.Com, LLC v. MKTG, INC.

United States District Court, D. Colorado

May 18, 2018

OCEANSIDE TEN HOLDINGS.COM, LLC, and MARKETONCE.COM, LLC, Plaintiffs,
v.
MKTG, INC., SAMPLE SOLUTIONS, LLC, and STEVEN H. GITTELMAN, Defendants.

          OPINION AND ORDER GRANTING MOTION TO TRANSFER

          MARCIA S. KRIEGER CHIEF UNITED STATES DISTRICT JUDGE.

         THIS MATTER comes before the Court pursuant to the Defendants' Motion to Transfer Venue (# 30), the Plaintiffs' response (# 35), and the Defendants' reply (# 40). Also pending is the Defendants' Motion to Stay (# 31) proceedings pending a ruling on the Motion to Transfer, which is denied as moot as a result of this Order.

         FACTS

         According to the Complaint (# 1), the Plaintiffs are businesses involved in conducting market research. Defendants Mktg, Inc. and Sample Solutions, LLC (collectively, “Sample”) are involved in the same business and have devised software that assists in performing market research.

         In 2016, the parties began discussing the Plaintiffs purchasing the rights to market research software owned by Sample, known as “ISIS” and “Crop Duster” (“the Software”). The Plaintiffs intended to modify the Software somewhat before reselling it, and emphasized to Sample that, as part of the sale, they would require access to Raymond Nicoletti, a Sample employee and the Software's author, for assistance in making the modifications. Sample, through Defendant Gittelman, its officer, promised to make Mr. Nicoletti available to the Plaintiffs: he would remain a nominal employee of Sample, but would spend 3/4 of his work time on the Plaintiffs' projects, with the Plaintiffs paying 3/4 of his salary. The parties also agreed that this arrangement would not violate an agreement between them not to solicit each others' employees. However, the Plaintiffs contend that, despite these promises, Mr. Gittelman never had any intention of making Mr. Nicoletti available to the Plaintiffs.

         The parties formalized and executed a written agreement for the sale of the Software (the “software sales agreement”) in April 2017, although it is important to note that the agreement does not contain any provisions regarding Mr. Nicoletti and that it contains an integration clause excluding any parol agreements. Almost immediately thereafter, the Defendants “delayed in fulfilling their obligations under that agreement, ” such as delaying the handoff of the Software itself for a period of several months and failing to provide additional data that was included in the Plaintiffs' purchase of the Software. The parties apparently resolved these disputes eventually, but the Plaintiffs contend that the Defendants continued to withhold the services of Mr. Nicoletti.

         In October 2017, Mr. Nicoletti resigned from employment with Sample, stating that he wanted to “follow the code” and joined the Plaintiffs to continue working on the Software. However, in November 2017, Sample's counsel wrote to Mr. Nicoletti, threatening to sue him if he continued to work for the Plaintiffs. Fearing the cost and risk of litigation, Mr. Nicoletti tendered his resignation to the Plaintiffs. Mr. Nicoletti's resignation caused delay in the Plaintiffs' intended sale of the modified Software, causing the Plaintiffs to suffer business losses.

         Based on these allegations, the Complaint alleges five claims against the Defendants, all sounding in tort: (i) “fraudulent inducement” against all Defendants, in that the Defendants induced the Plaintiffs to purchase the Software by falsely representing their intention to make Mr. Nicoletti available to the Plaintiffs; (ii) tortious interference with contract against all Defendants, in that the Defendants wrongfully interfered with the Plaintiffs' employment contract with Mr. Nicoletti; (iii) tortious interference with prospective relations against all Defendants, in that the Defendants' actions prevented the Plaintiffs from completing their modifications to the Software so that it could be marketed to the Plaintiffs' customers as anticipated; (iv) unjust enrichment against all Defendants in that the “Defendants received numerous benefits ranging from consideration under the software sales agreement, to decreased compensation from the Plaintiffs, to resultant increases profits for Defendants, ” all at the Plaintiffs' expense; and (v) promissory estoppel against all Defendants, in that the Plaintiffs detrimentally relied upon the Defendants' representations about making Mr. Nicoletti available when deciding to purchase the Software.

         In the instant motion, the Defendants move (# 30) to transfer this action to a court in New York State, consistent with a forum-selection clause included in the software sales agreement. That clause provides that “any judicial action or proceeding arising hereunder or relating hereto shall be brought in . . . the state or federal courts of Suffolk County, State of New York.” In response, the Plaintiffs contend that the forum selection clause does not apply to the claims asserted herein, because those claims do not “arise under or relate to” the software sales agreement itself.

         ANALYSIS

         A forum selection clause that states that a case “shall be” brought in a certain location is a mandatory one. American Soda, LLP v. U.S. Filter Wastewater Group, Inc., 428 F.3d 921, 927 n. 4 (10th Cir. 2005). Court will enforce a mandatory forum selection clause unless the party challenging it “clearly shows that enforcement would be unreasonable or unjust, or that the clause was invalid for such reasons as fraud or overreaching.” Niemi v. Lasshoffer, 770 F.3d 1331, 1351 (10th Cir. 2014), citing M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). The interpretation of a forum selection clause is governed by ordinary principles of contractual analysis. Milk N' More, Inc. v. Beavert, 963 F.2d 1342, 1345-46 (10th Cir. 1992).

         Here, the parties' dispute concerns whether the Plaintiffs' claims in this case “arise under” or “relate to” the software sales agreement. The Plaintiffs argue that none of their claims “arise under” the software sales agreement because none of those claims allege a breach of any contractual provision within the agreement. The Plaintiffs further contend that, to “relate to” the sales agreement, their claims must “involve the same operative facts as a parallel breach of contract claim” in order to fall within the scope of the forum selection clause. Citing Xantrex Tech, Inc. v. Advanced Energy Indus., Inc., 2008 WL 2185882 (D. Colo. May 23, 2008). In essence, the Plaintiffs contend that tort claims are governed by the forum selection clause only if a breach of contract claim could be (and perhaps is) brought on the same set of facts implicated by the tort claims.

         The Plaintiffs' reading of Xantrex and other cases is too narrow; none stand for the proposition that only tort claims that duplicate or parallel a breach of contract claim “relate to” a contract for purposes of a forum selection claims. Rather, a tort claim “relates to” a contract if it is “connected by reason of an established or discoverable relation” between the tort and the contract. Huffington v. T.C. Group, LLC, 637 F.3d 18, 21-22 (1st Cir. 2011). This is “broader than the concept of a causal connection.” Id. In Huffington, the plaintiff contracted to purchase securities based on representations by a broker about the securities' risk profile. When the securities underperformed, the plaintiff sued the broker for misrepresentation (but, notably, not for breach of contract), alleging that the representations about the securities' risk were false. The broker invoked the forum selection clause in the securities sale agreement that required disputes “with respect to” the sales agreement to be litigated in another forum. After finding that “with respect to” is functionally-identical to the term “relating to, ” the First Circuit concluded that the misrepresentation claims related to the securities sale agreement because the misrepresentations in question “proximately caused the agreement.” Id. at 22. As the court noted, “[e]ach cause of action Huffington asserted has as a prerequisite the loss that flowed from the agreement and acquisition.” Id. Thus, the court found the contractual forum selection clause to apply to the plaintiff's tort claims, notwithstanding the absence of any breach of contract claim.

         Accepting as true that the false promises by Mr. Gittelman about making Mr. Nicoletti available to the Plaintiffs were not incorporated into the actual software sales agreement -- much like the misrepresentations about the risk profile of the securities in Huffington were not incorporated into the securities sales agreement - the injury that underlies the Plaintiffs' tort claims nevertheless arises, inexorably and proximately, from the Plaintiffs' decision to purchase the Software, and the Plaintiffs' decision to purchase the software was predicated upon Mr. Gittelman's promise of access to Mr. Nicoletti. The Complaint repeatedly makes clear that the Plaintiffs insisted on access to Mr. Nicoletti as a condition of purchasing the Software, and would not have entered into the agreement if they had believed that the Defendants would not produce Mr. Nicoletti. See Complaint, ¶ 37 (“Plaintiffs made it abundantly clear to Defendants that they would require Defendants' agreement to let Nicoletti work with Plaintiffs in relation to any potential purchase of the software”); ¶ 113, 116 (Plaintiffs “relied upon” the false statements “regarding ...


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