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Junction Solutions, LLC v. MBS DEV

January 9, 2007

JUNCTION SOLUTIONS, LLC F/K/A JUNCTION MANAGEMENT SOLUTIONS, LLC, A DELAWARE LIMITED LIABILITY COMPANY, PLAINTIFF,
v.
MBS DEV, INC., A COLORADO CORPORATION, JEFFREY ERNEST, MITCH TUCKER, AND KENNETH R. PAUL, INDIVIDUALS, DEFENDANTS.



The opinion of the court was delivered by: Hon. Joan B. Gottschall

MEMORANDUM OPINION AND ORDER

Plaintiff Junction Solutions LLC ("Junction") sued defendants MBS DEV, Inc. ("MBS"), Jeffrey Ernest ("Ernest"), Mitch Tucker ("Tucker"), and Kenneth R. Paul ("Paul") in Cook County Circuit Court. The complaint alleged violation of the Illinois Trade Secrets Act, 765 ILCS 1065/1 et seq. ("ITSA") (Count II), violation of the parties' Confidentiality Agreement (Count III), breach of the parties' Employment Agreement (Count IV), "tortious interference with a contract" (Count V), and intentional interference with prospective economic advantage (Count VI).*fn1 The defendants subsequently removed the case to this court and have now moved to dismiss the suit for lack of venue. At the same time, Junction has moved to remand the case to the Cook County Circuit Court. For the reasons explained below, the defendants' motion to dismiss for lack of venue is denied, and Junction's motion to remand also is denied.

BACKGROUND

Junction is a provider of software and information technology consulting services for businesses. Among its software applications is the "Junction Multi-Channel Distribution Software" ("JMCD Software"), which allows businesses to increase the utility of certain software applications created by Microsoft. Defendants Ernest, Tucker, and Paul are former Junction employees who helped develop the JMCD Software. When they were hired, the defendants signed confidentiality and employment agreements under which they pledged, among other things, to protect Junction's trade secrets from disclosure to third parties. After helping to create the JMCD Software, however, they abruptly left Junction to begin working for MBS, a competing business software and consulting company started by other former Junction employees. MBS then began marketing a product which Junction claims is identical to its own JMCD Software. Junction claimed that the defendants used its intellectual property and trade secrets in developing MBS's product.

In November 2004, Junction sued MBS in the United States District Court for the District of Colorado. Junction Management Solutions, LLC v. MBS DEV, Inc., 04-cv-02288-PSW-MJW (D. Colo. filed Nov. 3, 2004) ("the Colorado suit"). The complaint alleged violation of the ITSA, breach of certain employment agreements, breach of fiduciary duty, inducing a breach of fiduciary duty, intentional interference with contractual relations, intentional interference with prospective business relations and prospective clients, and violation of the Uniform Deceptive Trade Practices Act, 815 ILCS 510/1 et seq. In December 2004, after Junction's motion for a preliminary injunction was denied, the parties reached a settlement agreement. Although Ernest, Tucker, and Paul were not originally named as defendants in the suit, they were parties to the Settlement Agreement and as such reaffirmed the pledges made in their Confidentiality and Employment Agreements not to disclose confidential and proprietary Junction information to third parties.

In February 2006, Junction learned that MBS had entered into a partnership with Iteration2, a California corporation, and that MBS and Iteration2 were planning to market a multi-channel distribution software product similar to Junction's JMCD software. On March 14, 2006, Junction filed the instant suit in the Circuit Court of Cook County. The defendants later removed the suit to this court, and now argue that the case must be dismissed for improper venue pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure. Specifically, the defendants claim that the Settlement Agreement resulting from the Colorado suit requires the present litigation to be brought in the District of Colorado. For its part, Junction argues that forum selection clauses in the Confidentiality Agreement and Employment Agreement signed by the defendants require that the case be remanded to the Circuit Court of Cook County. The court considers each issue in turn.

DISCUSSION

I. Defendants' Motion to Dismiss for Improper Venue

The defendants' sole argument for dismissal under Rule 12(b)(3) is that the Settlement Agreement reached in connection with the Colorado suit contained a clause requiring any claim arising under the Agreement to be brought in the United States District Court located in Denver, Colorado. Paragraph 19 of the Settlement Agreement provides:

Exclusive Venue. The parties agree that the exclusive jurisdiction and venue with respect to any claim or cause of action arising under this Agreement shall be the Federal court located in the City of Denver, Colorado . . . . The parties hereto each waive any objection based on forum non conveniens and waive any objection to venue of any action instituted hereunder.

Settlement Agreement ¶ 19.

In response, Junction argues that the Settlement Agreement does not apply to the present action. Specifically, Junction points to paragraphs 5(a) and 5(b) of the Agreement, which provide that the Agreement covers only claims existing up to the Agreement's effective date of December 8, 2004.*fn2 According to Junction, the conduct at issue in the present litigation took place after the Settlement Agreement's effective date and hence is not subject to the Agreement or its venue provision. In further support of its contention that the current suit is not subject to the Settlement Agreement, Junction notes that its current claims are brought against different defendants -- Ernest, Tucker, and Paul -- than those sued in the Colorado action, and that the current claims differ from those brought in the Colorado case.

The question whether the current suit is subject to the parties' earlier Settlement Agreement has been directly addressed by Judge Phillip S. Figa, who presided over the Colorado litigation and who retained limited jurisdiction over the case for the purpose of enforcing the Agreement. After filing their motion to dismiss in this court, the defendants filed an action before Judge Figa in the Colorado District Court seeking a declaratory judgment that they were in compliance with the Settlement Agreement and claiming that Junction had breached the Agreement by failing to bring its current claims in the District of Colorado. Judge Figa dismissed the defendants' claims, agreeing with Junction that the instant action was not covered by the Settlement Agreement. During a May 23, 2006 oral hearing on the motion, Judge Figa explained:

I understand the crux of the defendants' and Mr. Ernest, Mr. Tucker and Mr. Paul's motions, but I just don't find them to be meritorious to justify the Court's retention of jurisdiction in this case and the prohibition of the plaintiff to pursue its case in ...


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