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Church Mutual Insurance Co. v. Von Smith

United States District Court, W.D. Kentucky, Louisville Division

June 2, 2015

Church Mutual Insurance Company, Plaintiff,
v.
Von Smith, et al., Defendant.

MEMORANDUM OPINION AND ORDER

JOSEPH H. McKINLEY, Jr., Chief Judge.

This matter is before the Court on Claude Reynolds Insurance Agency, Inc.'s Motion to Dismiss. [DN 12]. Fully briefed, this matter is ripe for decision. For the following reasons, the Motion to Dismiss is denied in part and granted in part.

I. BACKGROUND

Church Mutual Insurance Company ("Church Mutual") provides casualty and property insurance for churches and other religious institutions. Over many years, it has built a large electronic database that it claims contains a vast collection of proprietary information about its customers. This database includes contact information, details on existing policies, general underwriting policies, bids made to potential customers, and so on. It relies on "regional representatives" who service specific geographic areas. These regional representatives sell policies, service existing customers, and help the company build goodwill. To that end, each regional representative receives access to the electronic database of proprietary information.

To protect this supposed proprietary information, Church Mutual utilizes password protection and data encryption. Additionally, regional representatives may access only the proprietary information pertinent to their assigned geographic areas. This prevents disgruntled or nefariously enterprising employees from leaving the company and accessing all of the company's data for the benefit of a competitor. Regional representatives must also sign non-disclosure agreements for the proprietary information, along with non-compete and non-solicitation agreements.

Von Smith was a regional representative. He served various counties in western Kentucky. When hired in 2008, he signed an employment contract ("the 2008 Contract") that included the non-disclosure, non-compete, and non-solicitation agreements. Originally, the non-compete and non-solicitation agreements extended for three years after his departure from Church Mutual. The contract's language also stipulated that he understood the electronic database was proprietary information, he knew he had no right to it, and he recognized the remedies Church Mutual would pursue if he violated the agreements. In December 2013, Smith signed a new contract ("the 2013 Contract") with Church Mutual. This time, the non-compete and non-solicitation agreements extended for only two years. In March 2014, his employment with Church Mutual ended.

Within mere days of the end of his Church Mutual tenure, Smith took employment with the Claude Reynolds Insurance Agency ("CRA"). CRA competes against Church Mutual. Three months after he left Church Mutual, Church Mutual began receiving tips that he was breaching his non-disclosure, non-compete, and non-solicitation agreements. At least three churches-former clients of Church Mutual that Smith serviced when he was at the company- admitted that Smith reached out to them and helped lure them away from Church Mutual. Church Mutual even received word from a former customer that, while at CRA, Smith telephoned the customer and told it that its Church Mutual policy was about to expire and that it could save money by buying a policy from CRA instead of renewing with Church Mutual. Because of these tips, Church Mutual sent Smith a cease and desist letter in July 2014. The letter warned that Church Mutual would take legal action against Smith and CRA. Smith never responded. Church Mutual sent a second letter in August 2014, and this time it also sent a copy to CRA. In August and September 2014, Church Mutual learned of other former customers whom Smith had contacted while at CRA. Church Mutual sued in November 2014.

Church Mutual has alleged several causes of action. The claims are: (1) breach of contract against Smith; (2) misappropriation of trade secrets against Smith; (3) misappropriation of trade secrets against CRA; (4) tortious interference with contract against CRA; (5) tortious interference with business expectancy against Smith; (6) tortious interference with business expectancy against CRA; (7) unjust enrichment against Smith; and (8) unjust enrichment against CRA. Church Mutual seeks a permanent injunction against both defendants. Towards the end of November 2014, the late Senior Judge John G. Heyburn II granted Church Mutual's motion for a temporary restraining order. Now, CRA has moved to dismiss this entire case for lack of subject matter jurisdiction. In the alternative, CRA has also moved to dismiss various causes of action for differing reasons. Church Mutual argues that CRA's motion is without merit and untimely, but-for purposes of judicial economy-it has suggested that the Court skirt the timeliness issue by treating CRA's pending motions to dismiss as motions for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). Conversely, CRA has moved for leave to amend its answer and cross-claim to resolve the timeliness issue. For efficiency's sake, the Court will take Church Mutual's suggestion and treat CRA's motion to dismiss as a motion for judgment on the pleadings.[1]

II. STANDARD OF REVIEW

A motion for judgment on the pleadings is weighed under the same standard as a motion to dismiss for failure to state a claim under Rule 12(b)(6). Wee Care Child Ctr., Inc. v. Lumpkin, 680 F.3d 841, 846 (6th Cir. 2012). Thus, courts faced with a Rule 12(c) motion must accept the plaintiff's well-pled allegations as true, "and the motion may be granted only if the moving party is nevertheless clearly entitled to judgment." JP Morgan Chase Bank, N.A. v. Winget, 510 F.3d 577, 582 (6th Cir. 2007) (citation omitted). To avoid judgment on the pleadings, "a complaint must contain direct or inferential allegations respecting all the material elements under some viable legal theory." Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 336 (6th Cir. 2007). The complaint "must contain sufficient factual matter to state a claim that is plausible on its face.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). And facial plausibility exists "when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009) (citing Twombly, 550 U.S. at 556)). That is, the plaintiff "must plead sufficient factual matter' to render the legal claim... more than merely possible." Fritz v. Charter Twp. of Comstock, 592 F.3d 718, 722 (6th Cir. 2010) (internal citation omitted). Courts will review the facts in the light most favorable to the non-moving party. See Columbia Natural Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995) (citation omitted). And, finally, courts may consider the complaint, the answer, and any written instrument attached as exhibits to those pleadings when deciding motions for judgment on the pleadings. Fed. Rs. Civ. P. 12(c), 7(a).

III. DISCUSSION

CRA has moved to dismiss this entire matter for lack of subject matter jurisdiction. In the alternative, it has moved to dismiss various causes of action in piecemeal fashion. The Court addresses each argument in turn.

Subject Matter Jurisdiction

CRA believes this entire case should be dismissed for lack of subject matter jurisdiction, pursuant to Federal Rule 12(b)(1). Church Mutual took issue with the timing of CRA's motion to dismiss, and it maintains that CRA's jurisdictional challenge is meritless. As to timing, "[i]f the court determines at any time that is lacks subject-matter jurisdiction, the court must dismiss the ...


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