The opinion of the court was delivered by: Magistrate Judge Young B. Kim
MEMORANDUM OPINION and ORDER
This multi-count diversity suit centers around Kenneth Tola, Jr.'s and BI3, Inc.'s ("the plaintiffs") allegations that Alan Hamor, WK Networks, Inc., and CampaignLocal, Inc. ("the defendants), failed to pay them money owed in connection with their work on various technology consulting projects. The plaintiffs also allege that the defendants fraudulently coerced Tola into assigning to CampaignLocal his rights to a website-tracking invention called Data Trender, which he had developed along with a business contact, Earl Grant-Lawrence. Currently before the court is the defendants' motion to dismiss six counts of the amended complaint under Federal Rule of Civil Procedure 12(b)(7) for failure to join Grant-Lawrence. For the following reasons, the Defendants' Motion to Dismiss Counts IV, V, VI, VII, VIII, and IX of the Amended Complaint For Failure to Join a Necessary Party is granted in part and denied in part:
On April 25, 2008, the plaintiffs filed their complaint seeking damages as well as equitable and declaratory relief. The complaint includes claims for breach of contract, quantum meruit, unjust enrichment, fraud, breach of fiduciary duty, and conversion. (R. 1.) The defendants filed counterclaims seeking declaratory relief and damages based on claims for breach of contract, indemnification, misappropriation of trade secrets, breach of fiduciary duty, tortious interference with business relationships, and unjust enrichment. (R. 11.) In June 2008 the parties consented to the jurisdiction of Magistrate Judge Keys, see 28 U.S.C. § 636(c), and began the discovery process.
Following the completion of fact discovery both sides moved for summary judgment on their opponents' claims. On May 12, 2010, this case was reassigned to this court. (R. 107.) The next day, the plaintiffs submitted in support of their opposition to the defendants' summary judgment motion an affidavit signed by Grant-Lawrence, stating that he and Tola invented Data Trender together and that he signed an assignment of his rights in Data Trender to CampaignLocal because Hamor led him to believe that he was not giving up his rights as an inventor. (R. 103, Grant-Lawrence Aff. ¶ 23.) In response, the defendants filed the current motion to dismiss six counts of the amended complaint pursuant to Rule 12(b)(7), arguing that Grant-Lawrence is a necessary party under Rule 19(a). They argue that Grant-Lawrence must be joined, or if joinder is not feasible, that the six claims pertaining to the Data Trender assignment must be dismissed. (R. 118.)
Before setting a briefing schedule on the current motion this court held a settlement conference with the parties on July 20, 2010. (R. 128.) The parties reached an agreement in principal that day, but needed additional time to finalize the details. Three months later, on October 18, 2010, the parties informed the court that they had not yet finalized the details of their agreement. Based on this report, the court set a briefing schedule on the current motion to dismiss. (R. 133, 134.) The parties completed briefing on December 10, 2010, and the motion is ripe for resolution.
The facts relevant to the current motion are those surrounding Grant-Lawrence's involvement in the design and development of-and eventual assignment of rights to-the Data Trender invention. Because in "ruling on a dismissal for lack of joinder of an indispensable party, a court may go outside the pleadings and look to extrinsic evidence," Davis Cos. v. Emerald Casino, Inc., 268 F.3d 477, 480 n.4 (7th Cir. 2001), the following facts are drawn from the amended complaint and the documents the parties submitted in support of their briefs on the current motion. In considering the current motion to dismiss under Rule 12(b)(7), the court accepts the allegations in the complaint as true. Id. at 479 n.2.
Tola, an Illinois citizen and the president and sole shareholder of BI3, provides "multi-tiered, distributed solutions" in the information technology field. (R. 11 ¶¶ 1-2, 4.) Hamor is a New Jersey citizen and the Chairman and CEO of WK Networks and CampaignLocal. (Id. ¶¶ 5, 7, 9.) In 2006 Tola began providing consulting services to WK Networks on a project known as AutomoAds, consisting of "a database and web-based interface that provided custom tools which allowed a user to generate a list of geographically based keywords for the automotive industry." (Id. ¶¶ 21, 24.) In November 2006 Hamor represented to BI3 that WK Networks "had decided to redirect efforts from AutomoAds to building a new Search Engine Marketing management platform to be called CampaignLocal." (Id. ¶ 50.) BI3 began working on the CampaignLocal project that same month. (Id. ¶ 53.)
In February 2007 Tola and Grant-Lawrence-a citizen of Texas-came up with an idea for website tracking technology that they called Data Trender. (R. 11 ¶ 133.) According to Grant-Lawrence's affidavit, he and Tola came up with the idea while talking on the phone about issues related to website tracking. (R. 118-3 ¶ 12.) The idea was for a website-tracking invention that provided "a way of sitting between a client requesting a remote service, web content, etc. . . . and a server that contains the desired content without either side being aware" of the tracker's presence. (Id.) The overall idea was Tola's, but Grant-Lawrence "provided significant implementation details" during the conversation "that significantly altered the original design." (Id.)
Shortly after this conversation Tola called Hamor and told him he planned to cut back on the work he was doing for CampaignLocal in order to focus on developing the Data Trender idea with Grant-Lawrence. (R. 11 ¶ 135.) Hamor then called Tola and Grant-Lawrence back and told them that he had pitched the Data Trender idea to his contacts at Google, Yahoo, and Microsoft and that they would be interested in purchasing the idea if they could prove it worked. (Id. ¶ 137; R. 118-3 ¶ 14.) Grant-Lawrence attests that Hamor told them that his contacts wanted to deal with Hamor or CampaignLocal and that it would be best to present Data Trender as an idea that CampaignLocal planned "to spin off into a new company." (R. 118-3 ¶ 17.) Hamor convinced Tola and Grant-Lawrence that they needed to develop a prototype and file a patent application quickly to protect the idea in upcoming pitches to potential purchasers. (Id.)
During March and April 2007, Grant-Lawrence worked to develop the Data Trender prototype while Tola focused on the patent prosecution side. (R. 118-3 ¶¶ 19-20.) After the patent application was filed, Hamor sent Grant-Lawrence and Tola a document titled "Assignment" which would transfer their rights in Data Trender to CampaignLocal ("the Data Trender Assignment"). (R. 11 ¶ 148.) According to Grant-Lawrence, he and Tola "questioned what the document was for because it appeared that we were giving up our rights as inventors." (R. 118-3 ¶ 22.) On April 18, 2007, Tola and Grant-Lawrence spent five hours on the phone with Hamor. (Id. ¶ 23; R. 11 ¶¶ 149-57.) The plaintiffs allege and Grant-Lawrence avers that during this conversation Hamor told them that a corporation, rather than individuals, had to file the provisional patent application and that the language in the Data Trender Assignment was just "legalese" which would not divest them of their rights as inventors. (R. 11 ¶¶ 154, 156; R. 118-3 ¶ 23.) Because they believed that they were merely allowing CampaignLocal to file a provisional patent application with the United States Patent & Trademark Office without relinquishing their rights as inventors, Tola and Grant-Lawrence agreed to the Data Trender Assignment. (R. 11 ¶ 156.)
In the current motion the defendants argue that pursuant to Rule 19(a), Grant-Lawrence must be joined in the amended complaint's counts four through nine, which attack the validity of the Data Trender Assignment under several theories. The defendants argue that Grant-Lawrence is a necessary party to these counts because his asserted ownership interest in Data Trender would be impaired by the relief Tola seeks. The defendants also argue that if this court lacks personal jurisdiction over Grant-Lawrence, counts four through nine must be dismissed. The plaintiffs argue that ...