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Now Disc, Inc. v. Munn

November 19, 2010

NOW DISC, INC., AN IDAHO CORPORATION, PLAINTIFF,
v.
JOHN MUNN, AN INDIVIDUAL, DEFENDANT.



The opinion of the court was delivered by: Honorable Edward J. Lodge U. S. District Judge

MEMORANDUM ORDER

Pending before the Court in the above-entitled matter are the Defendant's Motion to Dismiss and the Plaintiff's Motion for Preliminary Injunction. The matters are ripe for the Court's consideration. Having fully reviewed the record herein, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, this motion shall be decided on the record before this Court without oral argument. Local Rule 7.1.

Factual and Procedural Background

The Plaintiff, Now Disc, Inc., is a disc replication company located in Idaho Falls, Idaho. In September of 2008 the Defendant, John Munn, contacted Now Disc regarding possible employment. On September 18, 2008, the parties executed and entered into an Independent Contractors Agreement ("Agreement") by which Mr. Munn would "[m]anage and oversee and promote the sales of all optical media products of Now Disc in the eastern United States." (Dkt. No. 9, Ex. A ¶ 1.) Paragraph 8 of the Agreement is a non-solicitation, non-competition clause which precludes Mr. Munn from "soliciting or performing any work or duty in the sale or production of optical media products for himself, others, other entities, or competitors of Now Disc outside of this Independent Contractors Agreement or following termination of this Independent Contractors Agreement for a period of two years. The scope of [which] shall be the United States east of the Mississippi River." (Dkt. No. 9, Ex. A ¶ 8.) Any modifications of the Agreement were required to be in writing which was done once in June of 2009. (Dkt. No. 9, Ex. A ¶ 15.) Approximately a year later, on September 24, 2009, the parties business association was terminated.

Thereafter, on May 21, 2010, Mr. Munn filed a lawsuit in the Eastern District of North Carolina, Southern Division, against Now Disc for breach of contract. (Dkt. No. 7.) On, August 11, 2010, Now Disc filed the lawsuit against Mr. Munn in this District alleging breach of contract, breach of the implied covenant of good faith and fair dealing, conversion, breach of non-compete clause, fraud/intentional misrepresentation, unjust enrichment, violation of the Langham Act and/or trademark infringement, and for injunctive relief. (Dkt. No. 1.) Mr. Munn has not answered the Complaint in this case but has, instead, filed a Motion to Dismiss or, alternatively, to Stay this action until final determination of the North Carolina action. (Dkt. No. 7.) Now Disc likewise filed a Motion to Dismiss or, alternatively, to Transfer Venue in the North Carolina action. (Dkt. No. 7.) It appears the North Carolina court has, on September 20, 2010, granted Now Disc's Motion to Dismiss for improper venue. (Dkt. No. 10, Ex. A.) On September 30, 2010, Now Disc filed the instant Motion for Preliminary Injunction. The Court finds as follows.

Analysis

I. Defendant's Motion to Dismiss

Mr. Munn's Motion to Dismiss is made pursuant to Federal Rule of Civil Procedure 12(b)(3) and 13 alleging improper venue and to avoid duplicative litigation. (Dkt. No. 7.) The Motion asks the Court to dismiss the Complaint or, alternatively, to stay the proceeding pending a final determination as to venue in connection with the previously filed action in North Carolina. (Dkt. No. 7.) In response, Now Disc argues the Motion should be denied in light of the North Carolina court's ruling dismissing Mr. Munn's action filed in that court. (Dkt. No. 10.) Mr. Munn has not filed a reply and the time for doing so has expired.

Because the basis for Mr. Munn's Motion, the pendency of the venue motion before the North Carolina court, no longer exists, the Motion to Dismiss in this matter is moot. The North Carolina court has dismissed Mr. Munn's case in that district. (Dkt. No. 10, Starnes Aff, Ex. A.) As such, his Motion to Dismiss in this case is without an basis and will be denied.

II. Plaintiff's Motion for Preliminary Injunction

Now Disc seeks an injunction preventing Mr. Munn from engaging in conduct that violates the non-solicitation, non-competition clause in the Agreement. (Dkt. No. 12.) Mr. Munn has not responded to the Motion and the time for filing any response has passed. The Court finds as follows.

As Now Disc correctly argues, Idaho law applies to the Motion for Preliminary Injunction. (Dkt. No. 12, p. 2.) Where, as here, the Court's jurisdiction is based upon diversity of citizenship, state law governs the determination of the parties' substantive rights under their agreements. See Hogan v. Wal-Mart Stores, Inc., 167 F.3d 781, 783 (2nd Cir. 1999). Under the doctrine of Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78 (1938), federal courts exercising diversity jurisdiction in an action based on state law apply the same rules that state courts would apply to all "substantive" issues in the case; "procedural" matters, however, are controlled by the Federal Rules. See Walker v. Armco Steel Corp. 446 U.S. 740, 750 (1980). In the Ninth Circuit injunctive relief is a "substantive" issue and therefore governed by state, not federal, law. See Sims Snowboards, Inc. v. Kelly, 863 F.2d 643, 647 (9th Cir. 1988) ("The general equitable powers of federal courts should not enable a party suing in diversity to obtain an injunction if state law clearly rejects the availability of that remedy."). Thus, the Court here looks to state law to determine whether the relief requested by Now Disc, specific performance under the Agreement enforcing the non-compete clause, should be granted. In making this determination, Paragraph 8 of the Agreement resolves the choice-of-law question such that the parties have agreed that Idaho law will apply to any dispute between them. Accordingly, the Court will apply Idaho law to this Motion.

Idaho Rule of Civil Procedure 65(e), provides a preliminary injunction may be granted in the following cases:

(1) When it appears by the complaint that the plaintiff is entitled to the relief demanded, and such relief, or any part thereof, consists in restraining the commission or continuance of the acts ...


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