From Casetext: Smarter Legal Research

BCE EMERGIS CORP. v. PRISON HEALTH SRV.

Court of Chancery of Delaware
Jun 8, 2001
C.A. No. 18826-NC (Del. Ch. Jun. 8, 2001)

Opinion

C.A. No. 18826-NC

June 8, 2001

Richard K. Herrmann, Esquire, David E. Wilks, Esquire.


Dear Counsel:

Defendants, Prison Health Services, Inc. and its parent, America Service Group, Inc., (collectively "PHS"), have moved pursuant to Court of Chancery Rule 12(b)(1) to dismiss the Complaint of Plaintiffs, Up Up Health Services, Inc. and its parent, BCE Emergis Corporation, (collectively "Up Up"), for lack of subject matter jurisdiction.

My statement of the "facts" is taken, as it must be, from the allegations of the Complaint. Elf Atochem North America, Inc. v. Jaffari, Del. Supr., 727 A.2d 286, 287 n. 1 (1999) (considering dismissal under Court of Chancery Rule 12(b)(1) for lack of jurisdiction.)

Up Up and PHS are now two of the three firms competing in a lengthy solicitation process for a contract to provide managed health care. services to the Immigration and Naturalization Service ("INS"). Up Up currently holds the contract for that work.

B. Thomas Miller ("Miller") until July 2000 was the Senior Vice President of Up Up in charge of its INS project. In that position, Miller learned or developed proprietary and confidential business information regarding the performance of, and pricing of, the INS work. By July 2000, both PHS and Up Up were preparing to re-bid the INS project. Approximately two months before the re-bid was due, PHS lured Miller to become its Vice President/Government INS Services. The offer doubled his salary and included the promise of a substantial bonus, but was conditioned upon PHS' prevailing in the bid process against Up Up and the third bidder. PHS used Miller's knowledge of Up Up's trade secrets to bid the project. The bidding process remains ongoing.

Up Up seeks, inter alia, a preliminary injunction and a permanent injunction precluding PHS from using its proprietary information in furtherance of the INS bid effort and preventing its continued use of Miller, with his knowledge of Up Up's confidential information, from working on the INS project. Furthermore, Up Up seeks damages for the harm caused to it by PHS' use of Up Up's secrets brought to it by Miller. Up Up alleges both misappropriation of trade secrets and unfair competition.

Merely asking for injunctive relief does not assure a plaintiff access to equitable jurisdiction. Instead, the Court must look to the factual allegations to ascertain the substance of the dispute and the efficacy of any legal remedy. See McMahon v. New Castle Assoc., Del. Ch., 532 A.2d 601, 604 (1987).

Up Up did not secure from Miller a covenant not to compete or any other express contractual limitation with respect to business information learned from his employment with Up Up. See Wilmington Trust Co. v. Consistent Asset Mgmt. Co., Inc., Del. Ch., C.A. No. 8867-NC, mem. op. at 7, Allen, C. (Mar. 25, 1987).

PHS has moved to dismiss this action for lack of subject matter jurisdiction because, they argue, any harm to Up Up is fully compensable by damages and, thus, there is an adequate remedy at law. of course, if the remedy at law is adequate, this Court lacks subject matter jurisdiction. 10 Del. C. § 342.

Up Up points to numerous instances where this Court, at the request of a former employer, has enjoined former employees from using proprietary information taken from the former employer to advance the causes and the interests of the new employer.

See, e.g., American Totalisator Systems, Inc. v. Automatic Totalisators (U.S.A.) Ltd., Del. Ch., C.A. No. 5562-NC, Brown, V.C. (Apr. 20, 1978); American Totalisator Co., Inc. v. Autotote Limited, C.A. No. 7268-NC, Longobardi, V.C. (Aug. 18, 1983); E. I. duPont de Nemours Co. v. American Potash Chemical Corp., Del. Ch., 200 A.2d 428 (1964). See also Rypac Packaging Machinery, Inc. v. Coakley, Del. Ch., C.A. No. 16069-NC, Jacobs, V.C. (May 1, 2000)

PHS relies primarily upon this Court's decision in N.S.N. International Industries, N.V. v. E. I. duPont de Nemours Company. N.S.N. provided proprietary information regarding an armor system to DuPont, which agreed to keep the information confidential and not to use it outside the scope of their business arrangement. N.S.N.'s complaint alleged that DuPont had used the confidential information improperly with respect to a bidding effort that had been completed. It also anticipated that DuPont would be using that technology in the future to seek other contracts. The Court in N.S.N. concluded that there was an adequate remedy at law because an award of damages would compensate N.S.N. for any loss suffered during the completed bidding process and a declaratory judgment issued by a law court would protect its interests in the future because there was no ongoing effort to use the technology.

Del. Ch., C.A. No. 12902-NC, Chandler, V.C. (Mar. 31, 1994).

Two factors distinguish this action from N.S.N. First, N.S.N. involved a specific quantum of information that had been provided to DuPont. Here, Miller, it is alleged, has provided some proprietary information to PHS, but because it is information coming from an individual who is in continued employment, the reasonable inference from the Complaint is that the disclosure of confidential information is still ongoing. Second, in N.S.N., DuPont was not actively using N.S.N.'s technical information at the time of the proceeding. Some use had already been made; injunctive relief could not remedy that harm. It was also possible that the proprietary information would be used again in the future, but a declaratory judgment as to N.S.N.'s rights in the proprietary information, coupled with the threat of punitive damages, persuaded the Court that a declaratory judgment issued by a law court would protect against the potential of future harm. By contrast, PHS' alleged use of the proprietary information is ongoing as part of the continuing INS solicitation process. It is the allegation of current and ongoing use of the trade secrets that is of critical significance in distinguishing this case from N.S.N. The Complaint supports the inference that "the wrongs complained of are likely to be continued unless restrained."

Meyer Ventures, Inc. v. Barnak, Del. Ch., C.A. No. 11502-NC, mem. op. at 15, Allen, C. (Nov. 2, 1990).

PHS also asserts, more generally, that Up Up can be made whole by an award of damages. Miller was hired away from Up Up by PHS specifically for one contract. PHS points out that the contract is a "cost plus" contract, under which most of the compensation will be determined by applying a multiplier to the cost of performance. Thus, if Up Up does not win the INS contract and it is entitled to damages from PHS from its loss of that contract, the damages, according to PHS, would be relatively easy to establish. PHS' "one contract — one calculation" argument also suggests only a minimal, at most, risk of a multiplicity of suits. These arguments, however, are not properly before the Court because the Court "must confine [itself] to the allegations of the Complaint and exhibits thereto," and the compensation scheme of the proposed INS contract is not set forth in the Complaint.

Elf Atochem North America, Inc. v. Jaffari, supra, 727 A.2d at 287 n. 1.

Accordingly, because of the ongoing conduct alleged and because from the face of the Complaint it appears that money damages would not be adequate, PHS' Motion to Dismiss must be denied.

That the Court denies a motion to dismiss by concluding that there is not an adequate remedy at law does not necessarily mean that the plaintiff can also show the imminent and irreparable harm necessary to secure a preliminary injunction. The somewhat comparable review that occurs at the preliminary injunction stage involves both a broader scope of inquiry and a broader record (i.e., inquiry is not limited to the face of the Complaint).

IT IS SO ORDERED.


Summaries of

BCE EMERGIS CORP. v. PRISON HEALTH SRV.

Court of Chancery of Delaware
Jun 8, 2001
C.A. No. 18826-NC (Del. Ch. Jun. 8, 2001)
Case details for

BCE EMERGIS CORP. v. PRISON HEALTH SRV.

Case Details

Full title:BCE Emergis Corporation, et al. v. Prison Health Services, Inc., et al

Court:Court of Chancery of Delaware

Date published: Jun 8, 2001

Citations

C.A. No. 18826-NC (Del. Ch. Jun. 8, 2001)