Free Reply Memorandum - District Court of California - California

Case 3:08-cv-02611-SI

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David A. Gabianelli (State Bar No. 158170) Andrew L. Chang (State Bar No. 222309) SQUIRE, SANDERS & DEMPSEY L.L.P. One Maritime Plaza, Suite 300 San Francisco, CA 94111-3492 Telephone: +1.415.954.0200 Facsimile: +1.415.393.9887 Email: [email protected] Email: [email protected] Attorneys for Defendant CENTIMARK CORPORATION UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA (SAN FRANCISCO DIVISION) PATRICK HANSEN, Plaintiff, vs. CENTIMARK CORPORATION, Defendant. Case No. C-08-2611-SI Assigned to the Honorable Susan Illston REPLY BRIEF IN SUPPORT OF DEFENDANT'S MOTION TO DISMISS OR, IN THE ALTERNATIVE, STAY OR TRANSFER Hearing Date: August 22, 2008 Time: 9:00 a.m. Department: 10

I.

INTRODUCTION1

The first­filed rule does not apply in this case. Because the rule is intended to promote judicial efficiency and avoid duplicative lawsuits, deference is given to the first lawsuit only if the second action involves substantially similar issues and parties. Hansen seeks only a declaration that the non­compete and non­solicitation provisions in his Employment Agreement are unenforceable. The Pennsylvania Action, however, involves far more than these two provisions. CentiMark also seeks injunctive relief and monetary damages associated with (1) Hansen's misappropriation of CentiMark's trade secrets, breach of fiduciary duty, and other tortious conduct; (2) similar misconduct of Vitek and Tecta; and (3) Vitek's breach of his separate
1

Unless otherwise defined herein, all capitalized terms shall have the meaning ascribed to them in Defendant CentiMark Corporation's Notice of Motion and Motion to Dismiss or, in the Alternative, Stay or Transfer (the "Motion").
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employment agreement. The Pennsylvania court will be required to resolve these issues regardless of whether the two provisions in Hansen's Employment Agreement are unenforceable or not. This fact precludes any deference to Hansen's action under the first­filed rule. Even if the parties and issues were substantially similar, application of the first­filed rule is not warranted here because Hansen's action is an "anticipatory suit" intended to beat CentiMark to the courthouse. Hansen was aware that CentiMark would promptly file a suit against him when he resigned and joined Tecta. In fact, CentiMark had provided him with a written Memo during his employment advising that CentiMark would file suit if he breached his restrictive covenants (Hansen countersigned the Memo acknowledging his understanding of CentiMark's intentions). CentiMark also reminded Hansen of the restrictive covenants during his exit interview, rejected Tecta's attempts to open a dialogue to discuss the dispute, and specifically advised that it would be pursuing litigation. In response to these discussions, Tecta's law firm filed a cursory, 22­paragraph complaint on Hansen's behalf. Just four business days passed before CentiMark filed its voluminous 160­paragraph complaint in the Pennsylvania Action. Under these circumstances, it is apparent that this action is an anticipatory suit that is not entitled to "first­filed" status. Finally, Hansen's contention that this Court must remand the case to state court if it does not exercise jurisdiction is specious. Not a single case that Hansen cites for this proposition involves the first­filed rule in federal courts. Instead, each case that Hansen cites involves a federal court's decision to remand the case because the state court was better suited to address the unique state law issues in dispute. When two federal actions are pending, and the first­filed rule is implicated, this Court has both dismissed and transferred removed cases from California state court. The same result is warranted here.

II.

ARGUMENT

The first­filed rule is a doctrine of federal comity which permits a district court to refuse to exercise jurisdiction over an action if a complaint involving the same parties or issues is pending in another district. Pacesetter Sys. Inc. v. Medtronic, Inc., 678 F.2d 93, 94­95 (9th Cir. 1982). The court examines three threshold factors to determine if the rule applies: (1) the -2REPLY BRIEF IN SUPPORT OF DEFENDANT'S MOTION TO DISMISS - CASE NO. C-08-2611-SI

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similarity of the parties, (2) the similarity of the issues, and (3) the chronology of the two actions. Z­Line Designs, Inc. v. Bell'O Int'l LLC, 218 F.R.D. 663, 665 (N.D. Cal. 2003). Even if these three factors are satisfied, the court need not apply the first­filed rule. Id. The Ninth Circuit has explained that "[w]ise judicial administration, giving rise to conservation of judicial resources and comprehensive disposition of litigation, does not counsel rigid mechanical solution of such problems" involving multiple actions. Alltrade, Inc. v. Uniweld Prods., Inc., 946 F.2d 622, 627­28 (9th Cir. 1991). Courts do not apply the rule if the plaintiff filed the initial action in bad faith, as an anticipatory suit, or to forum shop. Z­Line, 218 F.R.D. at 665. Courts also refuse to apply the rule if the second­filed action can be resolved more promptly and conveniently. Id.

A.

The First­Filed Rule's Threshold Factors Are Not Satisfied in This Case

1.

The Parties and Issues are Not Substantially Similar

The requirement that the parties and issues be "substantially similar" ensures that the first­ filed action will effectively resolve the parties' dispute. Shapiro v. Jupiterimages Corp., No. C07­5540­PJH, 2008 WL 183511, at *1 (N.D. Cal. Jan. 18, 2008). In Shapiro, the defendant moved to dismiss the first­filed declaratory judgment action so that the parties' entire dispute could be resolved in the second­filed action in Connecticut. Id. This Court refused to apply the first­filed rule, and dismissed the first action, because it did not encompass all of the issues: [D]eclaratory relief would not terminate the entirety of the dispute between the parties. As defendant points out, the instant complaint alleges only a single complaint for declaratory relief based on the provisions of the contract at issue between the parties, while the Connecticut action alleges statutory and common law claims that go beyond just the contractual issues (e.g., allegations of Unfair Trade Practices Act and Uniform Commercial Code violations). That action also seeks money damages, a claim that is also beyond the scope of the instant complaint. Furthermore, many of the claims require interpretation of Connecticut state law, which the Connecticut district court is best placed to interpret. In sum, however, even if the court were to resolve the instant action, there would still be significant legal and damages issues that would need to be determined before the parties' dispute is fully clarified. Id. The overlap of issues in this case and the Pennsylvania Action is likewise so limited that a declaratory judgment will resolve but a fraction of the parties' dispute. Here, Hansen seeks only a -3REPLY BRIEF IN SUPPORT OF DEFENDANT'S MOTION TO DISMISS - CASE NO. C-08-2611-SI

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declaration that the non­competition and non­solicitation provisions in his Employment Agreement are unenforceable. Complaint, ¶¶ 11­14, 17. Hansen's lawsuit does not address CentiMark's claim for misappropriation of CentiMark's trade secrets. Nor does this action pertain to Hansen's tortious interference with CentiMark's existing and prospective customers, breach his fiduciary duty to CentiMark, and conspiracy to use CentiMark's proprietary information to unfairly compete with CentiMark ­ all of which are at issue in the Pennsylvania Action. See Verified Complaint, a copy of which is attached as Exhibit A to the Declaration of Patrick J. Hansen ("Hansen Decl."), at ¶¶ 22­28, 75­81, 112­139, 147­150. This Court's ruling on the enforceability of two provisions in Hansen's Employment Agreement will have no bearing on CentiMark's separate tort claims, and the Pennsylvania Action is therefore necessary to fully resolve the dispute between CentiMark and Hansen. In addition, and fatal to any attempt to invoke the first­filed rule, CentiMark has also asserted contract and tort claims against Tecta and Vitek in the Pennsylvania Action. CentiMark therefore cannot simply avoid duplicative lawsuits by filing counter­claims against Hansen. Hansen addresses this critical factor in a single paragraph by asserting that (1) parties need not be identical and (2) the parties do not "substantially differ" because Hansen and CentiMark are involved in both actions. See Plaintiff Patrick J. Hansen's Opposition to Defendant's Motion to Dismiss ("Opposition"), p. 9. These assertions are baseless. The fact that additional parties exist in the Pennsylvania Action weighs heavily against applying the first­filed rule. United Techs. Corp. v. Calaveras Cty. Water Dist., Civil No. 96­20369, 1996 WL 400960, at *3 (N.D. Cal. July 12, 2006) (rejecting first­filed rule because "if this court were to determine Calaveras' rights against UTC, but not against the individual defendants . . . piecemeal litigation would result"); see also Buchalew v. Celanese, Ltd., No. Civ. A. G­05­315, 2005 WL 2266619, at *3 (S.D. Tex. Sept. 16, 2005) ("The first­to­file rule does not require identical parties, but the fact that the parties are different cuts against an argument for substantial overlap."). In fact, the cases that Hansen cites establish that non­identical parties must have the same legal interests in order to be considered "substantially similar." Barapind v. Reno, 72 F. Supp.2d 1132, 1145 (E.D. Cal. 1999) ("The parties need not be identical. . . . If the parties 'represent the -4REPLY BRIEF IN SUPPORT OF DEFENDANT'S MOTION TO DISMISS - CASE NO. C-08-2611-SI

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same interests' the court may determine the second action is duplicative."). These cases establish that parties represent the same interests when they are related entities, divisions, or the like. Weinstein v. Metlife Inc., No. C06­04444, 2006 WL 3201045, at *4 (N.D. Cal. Nov. 6, 2006) (the classes of plaintiffs in two separate class actions had the same interests, and were therefore substantially similar, even though the class representatives differed); Inherent.com v. Martindale­ Hubbell, 420 F. Supp.2d 1093, 1099 (N.D. Cal. 2006) ("Martindale and Inherent are the parties in dispute in both the New Jersey and California actions. Although the suit in New Jersey was filed by Reed, it seeks declaratory relief that Reed is not obligated, through the actions of its Martindale division, to purchase any of Inherent's assets.") (emphasis in original); Guthy­Renker Fitness, LLC v. Icon Health & Fitness, Inc., 179 F.R.D. 264, 270 (C.D. Cal. 1998) (substantial similarity factor satisfied where the "additionally named defendants in the two actions are merely derivative manufacturers of the primary parties"). Tecta and Vitek are parties to separate written contracts with CentiMark, and do not "represent the same interests" as Hansen. Hansen therefore ignores this requirement and argues ­ without citing any legal authority ­ that the "substantially similar" requirement is satisfied simply because Hansen and CentiMark are parties to both actions. The very cases that Hansen cites belie this argument and establish that the parties are not "substantially similar." The first­filed rule therefore does not apply.

2.

The Chronology Does Not Support the Application of the First­Filed Rule

California courts have also repeatedly refused to apply the rule when the parties filed their respective lawsuits within days of one another. Aurora Corp. of Am. v. Fellowes, Inc., No. CV­ 07­8306­GHK, 2008 WL 709198, at *1 (C.D. Cal. Feb. 27, 2008) ("the first­filed rule is of no utility where competing cases are filed within a short interval of one another."); Z­Line, 218 F.R.D. at 667. In fact, in Z­Line, this Court refused to apply first­filed status to a California declaratory judgment action filed just two days before the defendant filed its action for damages in another forum. Z­Line, 218 F.R.D. at 667 ("Z­Line filed this complaint only two days before Bell'O filed its complaint in New Jersey. Considering this relatively short time period between -5REPLY BRIEF IN SUPPORT OF DEFENDANT'S MOTION TO DISMISS - CASE NO. C-08-2611-SI

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the two filings, the importance of the earlier filing date is diminished."). Hansen filed his 5­page, 22­paragraph Complaint in this action on Wednesday, April 23, 2008. Only four business days passed before CentiMark filed its Verified Complaint on Wednesday, April 30th. The comprehensive Verified Complaint is 30 pages long and contains 160 paragraphs. Considering the relatively short time period between the filings, and the obvious fact that it took longer for CentiMark to prepare a complaint which addressed the additional parties and issues that are required for a complete resolution of the parties' dispute, the first­filed rule does not apply.

B.

The Court Should Not Apply the First­Filed Rule Even if the Threshold Factors Had Been Satisfied

1.

The Totality of the Circumstances Establishes That This Action is an Anticipatory Suit Designed to Beat CentiMark to the Courthouse

In the Opposition, Hansen deceptively quotes Intersearch World, Ltd. v. Intersearch Group, Inc., 544 F. Supp.2d 949 (N.D. Cal. 2008), in support of his argument that CentiMark did not give specific and concrete indications that a lawsuit was imminent. Hansen selectively quotes Intersearch as stating: "[A] letter which [merely] suggests the possibility of legal action [, however] ... is not a specific, imminent threat of legal action." Opposition, p. 12. The text that Hansen has replaced with ellipses, however, is important. This Court actually stated that a letter which suggests the possibility of further action "in order to encourage or further a dialogue" is not an imminent threat. Intersearch, 544 F. Supp.2d at 960 (emphasis added). This distinction is critical. As is evident from the e­mail exchange the day after Hansen resigned, it was Tecta ­ and not CentiMark ­ that was attempting to encourage or further a dialogue. Declaration of Mark Santacrose, Exhibit A ("Let me know a good time to give you a call. I'd like to explain our actions with respect to yesterday's news [of the hiring of Hansen]. I'm sure you had a strong reaction but I'd like to give you our perspective ..."). The President of CentiMark, Timothy Dunlap, rebuffed Tecta's attempt to open a dialogue, stating that the misconduct could not be justified and that CentiMark was exploring its legal options. Id. Unlike Intersearch, Mr. Dunlap's reference to litigation terminated, rather than encouraged, any further dialogue to resolve the matter amicably. The e­mail constituted specific and concrete evidence of -6REPLY BRIEF IN SUPPORT OF DEFENDANT'S MOTION TO DISMISS - CASE NO. C-08-2611-SI

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imminent litigation in light of the surrounding circumstances.2 The e­mail is not the only notice that CentiMark provided to suggest that an action was imminent. Hansen also knew that litigation was forthcoming because: · Mr. Dunlap had previously sent a written Memo to Hansen to advise him of CentiMark's intention to enforce the restrictive covenants in the Employment Agreement. See Memo signed by Patrick J. Hansen, a copy of which is attached hereto as Exhibit A. In the Memo, Mr. Dunlap stated: "[T]here is a strong commitment by [CentiMark] to aggressively pursue anyone who violates the terms of his/her Employment Agreement. An aggressive practice to recover financial retribution, court costs and legal fees will be sought as part of any suit involving a violation of a CentiMark Employment Agreement." Id. at p. 1. Hansen signed the Memo to reflect that he read and understood it, and returned a copy to CentiMark. Id. at p. 2. The Vice President of Human Resources also reminded Hansen of the restrictive covenants during his exit interview on the day that he resigned. See Declaration of Barbara J. Felton in the Pennsylvania Action, a copy of which is attached hereto as Exhibit B, at ¶ 4. As set forth in the Motion, CentiMark spoke with the President of Tecta on the day after Hansen resigned. Declaration of Timothy Dunlap, a copy of which is attached hereto as Exhibit C, at ¶ 2. Tecta expressed the desire to resolve the parties' dispute amicably without the need for court intention. Id. at ¶ 3. CentiMark declined to entertain such a possibility, and instead stated that it would immediately pursue litigation against Tecta, Hansen, and Vitek. Id. at ¶ 4.

· ·

·

These circumstances, in addition to the e­mail exchange, establish that Hansen knew that litigation was forthcoming. In fact, Hansen acknowledges in his carefully crafted declaration that he did not actually authorize the filing of his lawsuit until after CentiMark made its intention to sue Tecta, Hansen, and Vitek abundantly clear. See Hansen Decl. at ¶¶ 16­17. In addition, the skeletal nature of Hansen's complaint suggests that he was rushing to get it on file before CentiMark sued him. In Shapiro, this Court recently relied upon the fact that the plaintiff filed a cursory declaratory relief complaint as evidence that its action was an anticipatory suit intended to win a race to the courthouse: No more than 48 hours after that conversation [in which the defendant discussed the possibility of filing a lawsuit], plaintiffs' state court
2

Hansen also cites to Guthy­Renker regarding the characteristics of concrete indications of an imminent lawsuit. Opposition, pp. 11­12. Like Intersearch, the letter in Guthy­Renker was intended to avoid litigation by encouraging settlement discussions. Guthy­Renker, 179 F.R.D. at 271. In fact, the company president who authored the letter admitted that he did not intend to threaten suit in his letter. Id. Guthy­Renker is therefore inapposite.

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complaint was filed ­ a check the box complaint that contains no specific or detailed allegations, and requests declaratory relief in a conclusory fashion. On the whole, the court finds these facts suggestive of an attempt to beat defendant to the courthouse door .... Shapiro, 2008 WL 183511, at *2 (internal citation omitted); see also Ex­Im Plastics, Inc. v. Miwon Am., Inc., No. CV­96­5710­JED, 1996 WL 928189, at *5 (C.D. Cal. Oct. 28, 1996) (the fact that the first action seeks only declaratory relief, rather than damages, "is another 'red flag' that there may be compelling circumstances to depart from the first­to­file rule."); United Technologies, 1996 WL 400960, at *2 ("Courts have repeatedly rejected the 'first to file' rule in light of the policies governing declaratory relief.").3 Hansen's failure to seek a preliminary injunction between April 23rd and May 12th, when he purportedly reported to work at Tecta, further establishes that he filed this action not to obtain an immediate ruling as to his ability to work for Tecta, but instead to beat CentiMark to the courthouse. The circumstances surrounding Hansen's consultation of various legal counsel further suggest that this lawsuit was anticipatory in nature. Hansen asserts that he consulted an unidentified California attorney in February of 2008, before he contacted Tecta, and was advised that he should consider a declaratory judgment action if he left CentiMark. Hansen Decl. at ¶ 11. Hansen then asserts that he instructed his attorneys to prepare such an action before he resigned, but did not authorize the filing until the day after his resignation. Id. at ¶¶ 16­17. The attorney who filed this action on Hansen's behalf, however ­ Charles W. Herf, who practices in the Phoenix office of Quarles & Brady LLP ­ does not appear to be the California attorney that Hansen originally contacted. In fact, Quarles & Brady has previously represented Tecta in other matters. Conveniently, Mr. Herf promptly withdrew as counsel and Otto Immel, the attorney at Quarles & Brady who is defending all defendants in the Pennsylvania Action (including Hansen),
3

Hansen incorrectly cites Stemcells, Inc. v. Neuralstem, Inc., No. C08­2364­CW, 2008 WL 2622831, at *2 (N.D. Cal. July 1, 2008), for the proposition that the fact that the first action seeks only declaratory relief is irrelevant in assessing the first­filed rule's applicability. Opposition, p. 9. In Stemcells, this Court stated only that the factors that courts must consider in the analysis are the same. Stemcells, 2008 WL 2622831, at *1. The Court did not hold that the declaratory nature of the first action cannot be considered in assessing those factors, including the similarity of the issues, the likelihood that the plaintiff was racing to the courthouse, and the judicial efficiencies and convenience associated with permitting the second action to resolve the parties' dispute. Id. To the contrary, the courts' analyses in the Shapiro, Ex­Im, and United Technologies cases make clear that the fact that the first­filed complaint seeks only declaratory relief is relevant to determining if it constitutes an anticipatory action intended to beat the defendant to the courthouse.

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entered his appearance. The fact that Hansen's attorney in the Pennsylvania Action immediately replaced the attorney who prepared and filed the cursory Complaint in this action further suggests that Hansen rushed to file this suit before CentiMark filed suit in Pennsylvania.4

2.

Principles of Judicial Economy Require that the Parties' Entire Dispute be Resolved in the Pennsylvania Action

Principles of "[w]ise judicial administration, giving rise to conservation of judicial resources and comprehensive disposition of litigation," further prevent the application of the first­filed rule in this instance. See Alltrade, 946 F.2d at 627­28. The dismissal of this case will result in the parties' entire dispute being resolved in a single forum. If the Court exercises its jurisdiction, however, multiple actions will necessarily result. The obvious efficiencies associated with resolving the entire dispute in a single forum preclude the application of the first­ filed rule. Schmitt v. JD Edwards World Solutions Co., No. C01­1099­VRW, 2001 WL 590039, at *3 (N.D. May 18, 2001) (rejecting the first­filed rule because the company's lawsuit would resolve not only the limited issue of the enforceability of the non­competition provision, but also the additional issues involving the improper disclosure of trade secrets). Only once in his 17­page Opposition, in a footnote, does Hansen even implicitly acknowledge that denying the Motion will result in two separate actions instead of a single lawsuit. Hansen states only that, because co­conspirators are not indispensable parties, CentiMark is not required to pursue its conspiracy claim against Hansen, Vitek, and Tecta in the same court. See Opposition, p. 10 n.7. This statement is a non sequitur. The question is not if CentiMark's conspiracy claim would be subject to dismissal for the failure to join indispensable parties if CentiMark elected not to join all co­conspirators in a single action. CentiMark has in

4

In the event that this Court gives credence to Hansen's purported communications with various attorneys regarding his legal rights, CentiMark respectfully requests the opportunity to take discovery on the issue. Despite Hansen's assertion to the contrary, he has clearly waived the attorney­client privilege with respect to the matters addressed in the Opposition and his declaration by disclosing his communications with counsel and affirmatively placing their substance at issue. McMorgan & Co. v. First California Mortgage Co., 931 F. Supp. 703, 708 (N.D. Cal. 1996) (the doctrine of limited/selected waiver does not apply in the Ninth Circuit, so the privilege is waived as to all parties once a privileged matter is disclosed); see also Chevron Corp. v. Pennzoil Co., 974 F.2d 1156, 1162 (9th Cir. 1992) (placing the advice of counsel at issue is a waiver because the attorney­client privilege cannot be used as both a sword and a shield). CentiMark should be permitted to discover the identities of the attorneys with whom Hansen consulted, the timing of each consultation, and the substance of each consultation to determine if the statements in Hansen's declaration are accurate.

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fact sued all three co­conspirators in Pennsylvania. Instead, the issue is if resolving the entire dispute will be more efficiently and effectively handled in the Pennsylvania Action in which all co­conspirators are parties.5 In addition, the fact that the second­filed action has progressed further than the first is a critical factor militating against applying the first­filed rule. In Mediostream, Inc. v. Priddis Music, Inc., No. C07­2127­PJH, 2007 WL 2790688 (N.D. Cal. Sept. 24, 1007), this Court considered the fact that the second­filed action had progressed through injunction proceedings in refusing to apply the first­filed rule. Id. *4 ("Mediostream does not dispute that the Nashville action has proceeded much further than this action; mediation is occurring in Nashville (which will likely result in a stipulated injunction), and a preliminary injunction motion was already filed before that court."); see also Guthy­Renker, 179 F.R.D. at 270 ("when the later­filed action has progressed further, efficiency considerations disfavor application of the rule."). Hansen ignores the undisputed fact that the Pennsylvania Action has progressed much further than this action, and instead misrepresents the activities that have occurred in that action. Hansen deceptively states that CentiMark sought an ex parte temporary restraining order ("TRO") in the Pennsylvania Action, which the court denied on two occasions. Opposition, pp. 1, 5. At no time did CentiMark seek an ex parte TRO. When CentiMark clarified that it was not seeking an ex parte TRO, the court promptly scheduled a hearing on the TRO with notice for May 27, 2008 and ordered the parties to submits proposed findings by May 23, 2008. Contrary to Hansen's contention, the court was prepared to rule on the motion for TRO. That ruling was not necessary, however. All parties in the Pennsylvania Action subsequently negotiated and stipulated to a mutually­agreeable interim Consent Order to govern their conduct until the court conducts an injunction hearing. The Pennsylvania court has entered the Consent Order, entered an order requiring them to preserve evidence, and established an
5

In the footnote, Hansen asserts that this Court has invoked the first­filed rule to dismiss a conspiracy claim against one conspirator even though the claims against the co­conspirators remained. Opposition, p. 10 n.7 (citing Grumman Sys. Support Corp. v. Data General Corp., 125 F.R.D. 160 (N.D. 1988)). Hansen misconstrues the Court's ruling. In Grumman, the parties and issues in the California and Massachusetts actions overlapped but were not substantially similar, so it was impossible to resolve all of the issues in a single lawsuit. Grumman, 125 F.R.D. at 161, 164­65. While the Court dismissed one claim so that it could be brought in Massachusetts, it made clear that the basis for doing so involved counterclaim issues, not the first­filed rule and its concern for judicial efficiencies. Id. at 164 (stating "The status of the first­filed action is irrelevant.").

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expedited discovery schedule. To date, the parties have exchanged approximately a dozen separate written discovery requests and/or responses, and have begun producing documents.6 In contrast, no injunction, discovery, or other proceedings have taken place in this Court. The fact that the Pennsylvania Action has progressed so much further than this action also weights heavily in favor of proceeding in Pennsylvania instead of this more limited and less developed action. Finally, Hansen's contention that his dispute with CentiMark is wholly unrelated to Pennsylvania is baseless. See Opposition, pp. 2, 10, 16. Hansen signed a written employment agreement with CentiMark, a Pennsylvania company, which was expressly governed by Pennsylvania law. See Memorandum of Law in Opposition to Defendants' Motion to Dismiss in the Pennsylvania Action, a copy of which is attached hereto as Exhibit D, at pp. 18­20.7 Hansen's responsibilities required him to interact with CentiMark in Pennsylvania on a routine, if not daily, basis in order to perform his job. Id. It is that very agreement that CentiMark seeks to enforce in the Pennsylvania Action. In addition, CentiMark seeks to enforce the protections that its trade secrets are afforded under common law. Hansen obtained those very trade secrets from CentiMark's computer servers located in Pennsylvania. Id. at p. 19. The crux of CentiMark's dispute with Hansen involves activities in Pennsylvania.

C.

The Court Has the Power to Dismiss, Stay, or Transfer This Action

Hansen's contention that this Court must remand the case to state court if it elects not to

6

Hansen's failure to even mention the stipulated Consent Order is particularly disturbing, particularly in light of his contention that CentiMark's attempts to obtain a TRO were denied. As is evident, Hansen's description of the activities that have taken place in the Pennsylvania Action in the Opposition is shockingly disingenuous.
7

Hansen's argument that a Pennsylvania court will ignore the Employment Agreement's choice of law provision, and apply California law, is similarly misguided. See Opposition, pp. 13­14. In the cases that Hansen cites, the courts applied California law only in restrictive covenant cases which did not involve trade secrets or otherwise involved only California sales activities. See General Video Corp. v. Soule, No. Civ.A. 99­CV­5117, 2000 WL 328118, at **8­10 (E.D. Pa. Mar. 27, 2000) (stating in dicta, after determining that defendant was not competing with his former employer, that California law would apply because both the defendant and his new company were in California); Cottman Transmission Sys., Inc. v. Melody, 851 F. Supp. 660, 671 (E.D. Pa. 1997) (applying California law in a franchise action that did not involve trade secret claims). Many courts have applied the parties' chosen law, rejecting a California employee's contention that the California statute addressing restrictive covenants requires the application of California law, in non­compete cases in which the employee is alleged to have misappropriated trade secrets obtained from a state other than California. See, e.g., Estee Lauder Cos. Inc. v. Batra, 430 F. Supp.2d 158, 170­73 (S.D.N.Y. 2006) (applying chosen New York law to non­compete agreement of California employee whose responsibilities extended nationwide); Lowry Computer Prods., Inc. v. Head, 984 F. Supp. 1111, 1113­15 (E.D. Mich 1997) (applying chosen Michigan law to non­compete agreement of California employee with alleged access to trade secrets). Because this case involves trade secrets which Hansen obtained from Pennsylvania, utilized across the country, and has the potential to disclose to Tecta in Illinois, no basis exists to ignore the Pennsylvania choice of law provision and apply California law.

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exercise jurisdiction is utterly specious. It is well established that, when parallel federal court actions exist, the court can dismiss, stay, or transfer the first­filed declaratory judgment action pending before it ­ even if that case was originally filed in state court. Not a single one of the cases that Hansen cites in his Opposition suggests otherwise. The cases that Hansen cites are the progeny of the Supreme Court's ruling, in Brillhart v. Excess Insurance Company of America, 316 U.S. 491 (1942), that federal courts should avoid needless determination of state law issues that are best resolved by the state court. For example, this Court cited Brillhart in remanding a case to state court in San Diego because a parallel action was pending in state court in San Francisco which would address the state­law issues in dispute. See Charter Oak Fire Ins. Co. v. American Home Assurance Co., No. C06­2779­MMC, 2006 WL 3050863, at **4, 7 (N.D. Cal. Oct. 25, 2006) (stating "[i]f there are parallel state proceedings pending at the time the federal declaratory judgment is filed, there is a presumption that the entire suit should be heard in state court.") (internal quotation and citation omitted). The Court expressly referenced the possibility that venue could be transferred so that both actions would be resolved by the state court in San Francisco. Id. at *7.8 The remaining cases that Hansen cites did not even involve a parallel lawsuit in state court. Instead, the federal courts determined that remand was proper because the cases involved unique state law issues that the state courts were best equipped to resolve. For example, in Golden Eagle Insurance Company v. Travellers Company, 103 F.3d 750 (9th Cir. 1996), the Ninth Circuit held that a parallel proceeding is not a prerequisite, and a federal court may decline to exercise jurisdiction if "the action belongs in state rather than federal court." Id. at 754 (internal quotation and citation omitted). The reason that remand is appropriate in such instances is to permit the state court to address the unique state laws at issue in the case. Id.9
8

In the South Carolina case upon which Hansen relies, the court similarly remanded the action because a parallel state court action was pending and the state court had a much stronger interest in resolving the state law issues in dispute. Hyrne v. Allstate Ins. Co., No. CA 2:06­CV­0584, 2006 WL 1889179, at *3 (D.S.C. July 7, 2006) ("Because plaintiffs have litigation pending in a related state case, any decision this court makes regarding UIM coverage could potentially create an unnecessary entanglement between state and federal court.").
9

All of the remaining cases that Hansen cites remanded the actions to state court not because federal courts lack authority to dismiss a removed action, but instead because the state law issues in dispute made the state courts the most effective and efficient jurisdictions to resolve the cases. See Del Suppo, Inc. v. Nautilus Ins. Co., Civil Action No. 07­952, 2007 WL 2345287, at *3 (W.D. Pa. Aug. 16, 2007) (remanding to state court because the dispute

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In short, Hansen has not identified a single case involving the first­filed rule in which a federal court determined that it should not entertain an anticipatory declaratory judgment action because the parties entire dispute could be more quickly and efficiently resolved in a different federal court, but nevertheless remanded the declaratory judgment action to state court. He cannot do so. Such an absurd result would be inconsistent with the desire to avoid duplicative litigation. If this Court determines that parties' entire dispute can be more effectively and efficiently resolved in the Pennsylvania Action, remanding the case to a state court in California would be nonsensical. For this reason, this Court has made clear in its decisions involving the applicability of the first­filed rule ­ including in Inherent.com, a case upon which Hansen relies ­ that it has the authority to dismiss, stay, or transfer an action that it was originally filed in California state court and removed to federal court. See Schmitt, 2001 WL 590039, at *3 (dismissing the first­filed declaratory judgment action, even though it had originally been filed in California state court, so that the entire dispute could be resolved in the defendant's action in Connecticut); Inherent.com, 420 F. Supp.2d at 1097, 1101 (declining to exercise jurisdiction, and transferring the case to New Jersey, even though the action had originally been filed in California state court). Hansen's argument that this Court's only recourse is to remand the case to state court is meritless. DATED: August 8, 2008 Respectfully submitted, SQUIRE, SANDERS & DEMPSEY L.L.P. By: /s/ David A. Gabianelli David A. Gabianelli Attorneys for Defendant CENTIMARK CORPORATION

OF COUNSEL: Peter S. Russ / Gregory J. Krock Buchanan Ingersoll & Rooney One Oxford Centre, 301 Grant St., 20th Floor Pittsburgh, PA 15219-1410 Telephone: +1.412.562.8800/Facsimile: +1.412.562.1041

involved well­settled insurance law best resolved by the state court); Warner v. Frontier Ins. Co., 288 F. Supp.2d 127, 132 (D.N.H. 2003) (remanding to state court because the dispute involved unsettled dispositive issues of state law); McDowell Oil Serv., Inc. v. Interstate Fire & Caus. Co., 817 F. Supp. 538, 545­46 (M.D. Pa. 1993) (remanding to state court that had recently addressed similar issues because "[l]itigating those claims before a state court judge already intimately familiar with the intricacies of these much litigated underlying actions will allow for a much more expeditious resolution of this action.").

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