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COHEN v. LEWIS

November 1, 2004.

JOSEPH E. COHEN, Trustee for the Estate of VisionTek, LLC, Plaintiff,
v.
RIC LEWIS, ROBERT SHANE VANCE, SCOTT A. HERKELMAN, JOHN R. MALLEY, JOHN F. HALL, BFG TECHNOLOGIES, INC., ADVANCED EQUITIES, INC., KEITH G. DAUBENSPECK, DWIGHT O. BADGER, CHRISTOPHER R. PRAVECEK, JOHN SLEVIN, JOHN VOSICKY, NVIDIA CORPORATION, HILTON SESSEL, MITAC INTERNATIONAL CORP., and BARBARA LEWIS, Defendants.



The opinion of the court was delivered by: MARTIN ASHMAN, Magistrate Judge

MEMORANDUM OPINION AND ORDER

Before the court are the motions of defendants Nvidia Corporation ("Nvidia") and Hilton Sessel ("Sessel") to dismiss Counts XXIII and XXVI of the Second Amended Complaint of plaintiff Joseph E. Cohen, Trustee for the Estate of VisionTek, LLC. For the following reasons, the court denies both defendants' motions to dismiss those counts. I. Background

  Prior to its Chapter VII bankruptcy proceedings,*fn1 VisionTek manufactured and sold microelectronic modules — called "cards" — for the enhancement of graphics in computer games and personal computers. In August of 2002, several VisionTek employees left to either form, or work for, a new company, BFG Technologies, Inc. ("BFG"). The Trustee's Second Amended Complaint ("Complaint") is a seventy-page, twenty-seven-count filing that characterizes that exodus as a conspiracy to misappropriate VisionTek's trade secrets and confidential information; solicit its employees, suppliers, and customers; and form a new company to compete with VisionTek and run it out of business. The Trustee has named the former employees in counts charging breaches of their non-competition agreements and confidentiality agreements.

  Defendant Nvidia Corporation ("Nvidia") manufactures hardware and software components of graphics cards and was a key supplier to VisionTek. Defendant Hilton Sessel ("Sessel") was Nvidia's director of sales during the relevant period. According to the Trustee, Nvidia and Sessel were essential participants in the conspiracy: if Sessel had not agreed to terminate Nvidia's relationship with VisionTek and do business with the new company, BFG, the former VisionTek employees would not have carried out their plan. Thus, in Count XXIII, the Trustee alleges that Nvidia and Sessel committed tortious interference with the contractual relationships VisionTek had with its soon-to-be-former employees. In addition, the Trustee claims that Nvidia and Sessel falsely indicated to BFG and others that the purchase of VisionTek inventory would subject them to liability. Under Count XXVI, the Trustee contends that this constituted tortious interference with prospective economic advantage. Nvidia and Sessel move to dismiss these counts, arguing that the Trustee has improperly embroiled them in a dispute between VisionTek and its former employees.

  A. Trustee's Allegations

  For the purposes of considering the defendants' motions to dismiss, the court accepts all of the Trustee's well-pleaded allegations as true, and draw all reasonable inferences in the Trustee's favor. Bressner v. Ambroziak, 379 F.3d 478, 480 (7th Cir. 2004). Founded in 1988, VisionTek, as already noted, manufactured and distributed computer graphics cards for use in computer games and home computers. (Complaint, ¶ 23). As a participant in the highly competitive consumer electronics industry, VisionTek was understandably concerned with maintaining the confidentiality of its trade secrets and its design, development, and manufacturing methods. (Id., ¶¶ 24-25). To that end, the contracts it executed with its employees included confidentiality and non-competition agreements. (Id., ¶¶ 30-33, 36-38, 40, 42-44, 46-49). In 2002, VisionTek began discussions with Advanced Equities, Inc. ("AEI") regarding efforts to raise capital. (Id., ¶ 57). The parties entered into a non-disclosure agreement to protect any confidential information that might be exchanged during the course of their discussions. (Id., ¶ 58). By July of 2002, discussions had progressed to a point where the parties had raised the possibility of AEI purchasing some or all of VisionTek's outstanding shares, and AEI conducted a due diligence examination of VisionTek. (Id., ¶ 60-61). On August 5, 2002, three VisionTek representatives — Ric Lewis, Robert Vance, and Scott Herkelman — met with AEI representatives — Keith Daubenspek, Dwight Badger, Christopher Pravecek, John Slevin, and John Vosicky — to negotiate AEI's purchase of VisionTek. (Id., ¶ 64). In these negotiations, the VisionTek representatives sought to secure positions and ownership interests in the successor company for themselves, but their demands were rejected. (Id., ¶ 64).

  Meanwhile, according to the Trustee, its employees were fomenting a mutiny. The Trustee alleges that these same eight individuals, and perhaps others, were engaging in clandestine discussions in which they agreed upon a plan to derail the AEI-VisionTek negotiations and create a new company that would include many of VisionTek's employees. (Id., ¶ 65). During these discussions, these individuals "reviewed and utilized [VisionTek's] confidential information," which they had accumulated during the employees' tenures with VisionTek or during the AEI-VisionTek negotiations, in order to analyze and evaluate the feasibility of creating a new company. (Id., ¶ 66). Pursuant to their plan, the new company would solicit VisionTek's employees, customers, and suppliers, taking over VisionTek's business and eventually driving it from the market. (Id., ¶ 67). In order for the scheme to succeed, however, the mutinying VisionTek employees would have to solicit and convince certain key suppliers to cooperate by severing their business relationships with VisionTek in favor of the newly formed company. (Id., ¶¶ 68, 88).

  Enter Nvidia — one of those key suppliers — and its director of sales, Sessler. The Trustee claims that, through Sessler, Nvidia agreed to cooperate with the scheme, support the new company, and cease doing business with VisionTek. (Id., ¶ 70). According to the Trustee, this was of vital importance to the success of the plan: it could not succeed without Nvidia's participation. (Id., ¶ 70). In addition, the Trustee claims that Sessel also:
advise[d] one or more individuals and/or entities with which [VisionTek] was conducting, or had an expectation of conducting, business, that [VisionTek] did not have the legal right to sell [VisionTek's] inventory. Nvidia, through Sessel, threatened to hold such individuals and/or entities liable should they do business with [VisionTek].
(Id., ¶ 71).
  On August 14, 2002, the three VisionTek employees involved in the original discussions with AEI — Lewis, Vance, and Herkelman — abruptly resigned from VisionTek, but not before pirating away certain confidential files and business plans. (Id., ¶ 75, 80, 82-83). According to the Trustee, on that same day, August 14:
reservations were made for Lewis, Vance, Herkelman and Slevin to travel to Atlanta to meet with Sessel of Nvidia. Upon information and belief, the purpose of this meeting was to discuss the plan of Slevin, Vosicky, Daubenspek, Badger, Pravecek, [AEI], Lewis, Vance, Herkelman, and possibly others, to form their own company to compete with, and destroy, [VisionTek], and to confirm Nvidia as a supplier to the new company.
(Id., ¶ 78). By August 23, 2002, the three VisionTek mutineers solicited some additional employees — among them, John Malley and John Hall, now defendants in this lawsuit — to leave VisionTek as well. (Id., ¶ 85-86). On August 27, 2002, the new company, BFG, was incorporated. (Id., ¶ 84). Thereafter, according to the Trustee:
Lewis, Vance, Herkelman, Malley, Hall, Slevin, Vosicky, Daubenspek, Badger, Pravecek, and AEI . . . solicited suppliers of [VisionTek] to stop doing business with [VisionTek] and to do business with BFG. The suppliers that were solicited included: . . . Nvidia . . .
(Id., ¶ 88).

  As already noted, the Trustee names Nvidia and Sessel in two of his Complaint's twenty-seven counts. In Count XXIII, the Trustee alleges that Nvidia and Sessel are liable for tortious interference with contractual relationships. According to the Trustee, the two defendants were aware of the various confidentiality and non-competition agreements VisionTek had with the employees that left it to form and work for BFG. (Id., ¶¶ 91-92). The Trustee claims that, nevertheless, Nvidia and Sessel intentionally, and without justification, induced those employees to breach those agreements. (Id., ¶ 93). In Count XXVI, the Trustee alleges that VisionTek "had a reasonable expectation of entering into a valid business relationship with" — oddly enough — the newly formed "BFG and others relating to the purchase of certain of [VisionTek's] inventory." (Id., ¶ 91). The Trustee further alleges that Nvidia and Sessel had knowledge of this expectation, and intentionally and unjustifiedly interfered with it by falsely stating that purchase of VisionTek's inventory would subject "BFG and others to liability." (Id., ¶ 92-93). According to the Trustee, such actions were "intentional, malicious, and without legal justification" and "served no legitimate business purpose." (Id., ¶ 94).

  B. Defendants' Arguments

  Nvidia and Sessel move to dismiss both counts. The two defendants argue that Count XXIII fails to state a claim for tortious interference with contractual relationships because the Complaint alleges that VisionTek's employees solicited Nvidia to do business with BFG, as opposed Nvidia or Sessel inducing any VisionTek employees to breach their contracts. According to Nvidia and Sessel, the Trustee complains of nothing more than Nvidia ending one business relationship with VisionTek, and commencing another with BFG. As for Count XXVI, Nvidia and Sessel question how the Trustee can allege that VisionTek had a legitimate expectation of doing business with BFG, which was established by and composed of the individuals the Trustee claims set out to destroy VisionTek. The two defendants also contend that the Complaint fails to allege that any statements they made about their own legal rights were asserted in bad faith. Beyond that, Nvidia and Sessel find fault with the Complaint's demand for punitive damages. Finally, Sessel argues that the court cannot exercise personal jurisdiction over him without violating his Fifth Amendment rights.

  II. Analysis

  The standards for pleading under the Federal Rules of Civil Procedure are liberal: "[a] court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514, 122 S.Ct. 992, 998 (2002) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984)). The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide its merits. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). "All that's required to state a claim in a complaint filed in a federal court is a ...


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