IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND WAYPOINT CONSULTING, INC. f/k/a PINNACLE ADVISORY GROUP, INC., Plaintiff, v. ANDREW J. KRONE, et al., Defendants.
Civil No. ELH-19-2988
MEMORANDUM OPINION In this breach of contract and trade secrets dispute, plaintiff Pinnacle Advisory Group, Inc. Pinnacle now known as Waypoint , brought suit against ne, CapitalRock Financial, LLC d/b/a Naples Wealth Planning Wealth ECF 1. See, e.g., ECF 128 at 1; ECF 141-1 at 1; ECF 142
at 1. Therefore, for the sake of consistency, I shall also refer to plaintiff as Pinnacle , unless otherwise noted
The suit is rooted in allegations that Krone, who worked for Pinnacle between October 1, 2009, and August 30, 2019, unlawfully misappropriated intellectual property and confidential information from Pinnacle when he left Pin agreement. Further, plaintiff claims that Krone used
in violation of his employment agreement with Pinnacle, as well as the Maryland Uniform Trade Secrets Act, Md. Code, § 11-1201 et seq. . In addition, plaintiff contends that defendants breached an implied covenant of good faith and fair dealing.
In an eight-count amended complaint, Pinnacle asserts the following claims:
C.L. § 11-1201 et seq. enrichment (Count Eight). See -17. 1
Plaintiff has filed a motion for partial with respect to Count One, Count Two, and Count Six (ECF 124), which is supported by a memorandum of law (ECF 124-1) (collectively, the S.J. Motion ) and several exhibits. Thereafter, defendants filed a cross-motion for summary judgment as to all claims (ECF 134), and various exhibits. Although the motions have been fully briefed, they are not addressed here. This Memorandum Opinion pertains to four other matters, as follows.
Plaintiff has filed a To Exclude The Expert Report, Opinions, And Testimony Of Michael Terrana. ECF 125. The motion, filed pursuant to Fed. R. Evid. 702 and Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993), is supported by a memorandum of law (ECF 125- xpert several exhibits. Defendants oppose the Expert Motion. ECF 133. Plaintiff has replied. ECF 138.
In addition, the parties have filed sealing motions in connection with the S.J. Motion, the Expert Motion, and the Cross Motion. Specifically, plaintiff has filed a Motion To Seal Certain Exhibits Contained I On Liability And Motion To
1 By Memorandum (ECF 121) and Order (ECF 122) of August 26, 2021, the Court granted plaintiff leave to file the Amended Complaint, so as to allow plaintiff to amend the caption of the then-current trade name, Waypoint Consulting, Inc.
Exclude The Reports, Opinions, And Testimony O . ECF 128 (the Sealing Motion Defendants oppose the Pinnacle Sealing Motion. ECF 132. Plaintiff has not replied, and the time to do has expired. See Local Rule 105.2(a).
Defendants also filed a To Seal. ECF 136. It is supported by a memorandum of law (ECF 136-2) (collectively, the ense Sealing The Defense Sealing Motion pertains to seven exhibits that were submitted in support of the Cross Motion. Plaintiff has not responded to the Defense Sealing Motion, and the time do so has expired. See Local Rule 105.2(a).
I shall also resolve pla (ECF 141), which is supported by a memorandum of law (ECF 141-1) (collectively, the
Motion. See ECF 141-2. Defendants oppose the Substitution Motion (ECF 142), supported by two exhibits. ECF 142-1; ECF 142-2. And, plaintiff has replied. ECF 143. No hearing is necessary to resolve the motions. See Local Rule 105.6. For the reasons that follow, I shall deny the Expert Motion as premature, and without prejudice. I shall also deny the Pinnacle Sealing Motion in part and grant it in part. In addition, I shall deny the Defense Sealing Motion. And, I shall grant the Substitution Motion.
I. Factual Background 2 For the most part, the underlying facts of this dispute are not germane to the motions addressed in this Memorandum Opinion. However, some background is helpful to contextualize the issues.
2 The Factual Background is drawn from my Memorandum Opinion of March 18, 2020 (ECF 46); my Memorandum of May 12, 2021 (ECF 102); the S.J. Motion; the Cross Motion; and the exhibits filed in support thereof.
Krone was employed by Pinnacle from October 1, 2009, until August 30, 2019. ECF 124- 23; ECF 135 at 9-10, On or about May 5, 2010, Pinnacle and Krone executed an Employment Agreement. ECF 124-1, ; ECF 135 at 10 see ECF 135-3 . Among other things, the Employment Agreement included a covenant not to
compete, by during the Initial Term of employment and for any Addition [sic] Term, and for one year following the termination of [his] employment for any reason, [he] will not perform or render services or attempt to perform or render services . . . for any customer or client of [Pinnacle] for which [he] . . . has performed any services . . . . ECF 135- However, the covenant excluded Advisory Group[.] Id.
Moreover, during or following his employment with the Company, Agreement prohibited Krone from divulg[ing] or disclos[ing], or employ[ing] for any purpose whatsoever, . . . any of the trade secrets or other confidential information that have been obtained by or disclosed to [him] as a result of [his] employment with the Company. ECF 135-3,
In March 2019, plaintiff met with a Naples Wealth official working for Naples Wealth. ECF 124- see ECF 135 at 43 (indicating that defendants do
not dispute this assertion). Thereafter, Krone, on at least one occasion, prepared a schedule[ ] of client names, information, [and] a Naples Wealth official. ECF 124- (citation and internal quotation marks omitted); see
ECF 135 at 46 (indicating that defendants did not dispute that Krone shared one schedule of client information with Naples Wealth). 3
Krone resigned from his position with Pinnacle on August 30, 2019. ECF 124- ECF 135 at 10 . Four days later, on September 3, 2019, Krone became an employee of Naples
Wealth. ECF 124- see ECF 135 at 43 (noting that defendants do not dispute this assertion). Pinnacle client advertising Naples Wealth products, criticizing Pinnacle products, and offering a
call with other Naples W - see ECF 135 at 43 (noting that defendants do not dispute this assertion).
Pinnacle asserts: At or around the same time, [it] received notices from other clients that - according to defendants, by the end of 2019, twenty- non-exempt - E rminated their relationship with Pinnacle. ECF 135 at 13 Suit followed on October 14, 2019. ECF 1.
Pertinent here, Pinnacle seeks, inter alia Agreement] in the ad damnum clause of each Count, plaintiff asks the Court to and nd
See, e.g., id. at 9. Plaintiff also
3 Plaintiff avers that Krone transmitted schedules of client information to Naples Wealth on three occasions. ECF 124- Wealth with only one schedule of client information. ECF 135 at 46.
award and punitive damages, together with reasonable
relief as this Court may deem necessa Id..
Notably, on April 30, 2021, Pinnacle sold its entire financial planning, asset and investment management business to a limited liability company, Congress Wealth Management, LLC pursuant to an Asset Purchase Agreement. ECF 135 at 14, see ECF 137- 7 4
T prohibiting Pinnacle or its shareholders from providing any financial planning, asset or investment at 14 ; see ECF 137-7 at 3-5. April 30, 2019 through April 30, 2021, meaning the restrictions include all of the Non-Exempt
at 14 see ECF 137-7 at 2, 4. APA], Pinnacle no longer provides financial plannin at 14
II. Expert Motion Turning first to the Expert Motion, plaintiff asks the Court to
Rules 104, 401, 403 and 702 of the Federal Rules of Evidence. ECF 125-1 at 6. Pertinent here, defendants retained Mr. Terrana to ref damages expert, R. Christopher Rosenthal, and to offer his own opinion on the same topic. Id. at 6-8.
Plaintiff asks the Court to exclude Mr. Terrana as a witness on numerous grounds. In particular, plaintiff contends that Terrana is unqualified; he has used an incorrect measure of
4 As discussed below, excerpts from the APA have been filed under seal. See ECF 137-7.
damages; he relies solely on his experience, which is insufficient; he fails to note any methodology; and his opinions are improper legal opinions. Id. at 7-8.
In my view, the Expert Motion is premature. Notably, the S.J. Motion and the Cross Motion concern only the issue of whether there exists a genuine dispute of material fact with . 5
including the admissibility of evidence that speaks to that determination, has no bearing on the resolution of the S.J. Motion or the Cross Motion. And, in the event that the Court were to determine that defendants are entitled to summary judgment, the Expert Motion would be rendered moot.
Notably, courts have inherent authority to manage their dockets. See Landis v. North American, 299 U.S. 248, 254 (1936); Crown Cent. Petroleum Corp. v. Dep't of Energy, 102 F.R.D. 95, 98 (D. Md. 1984); see also United States v. Schneider, 594 F.3d 1219, 1226 (10th Cir. 2010) The power of district courts to manage their dockets Accordingly, rather than allow the Expert Motion to languish on the Docket until the resolution of the S.J. Motion and the Cross Motion, I shall deny it as premature, without prejudice right to renew the motion at the appropriate juncture.
III. Sealing Motions I next address the parti To that end, some further background on the relevant motions and exhibits is necessary.
During (ECF 57), which was approved by the Court on August 20, 2020. ECF 58. The Order permitted
5 As mentioned, plaintiff has moved for partial summary judgment as liability with respect to Count One, Count Two, and Count Six. See ECF 124-1 at 6. However, entirety. See ECF 135 at 9.
CONFIDENTIAL, s it contains sensitive personal information, trade secrets, or other confidential research,
ECF 57, CONFIDENTIAL
EYES ONLY, if the designating party believes in good faith that the relevant material has Id. 1(b). Moreover, the Order specifies that any materials
submitted to the Court that were previously designated either as Confidential or A Eyes Only must be filed under seal. Id. -(b).
Plaintiff has moved to seal five exhibits filed in support of its Expert Motion, as well as three exhibits filed in support of its S.J. Motion. ECF 128. The sealed versions of these documents are docketed at ECF 126-1 to 126-5 and ECF 127-1 to 127-3, respectively. Notably, Pinnacle did not submit redacted versions of the relevant exhibits for filing on the public docket.
With respect to the S.J. Motion, plaintiff asks the Court to seal the deposition transcripts of Krone (ECF 127-1) and Brian Bruneau, an employee of Naples Wealth (ECF 127-2), on the ground that [t]hese transcripts contain specific reference to the identity of clients and indirect 3. In addition, plaintiff asks the Court to seal ECF 127-3, which conta
of 2019 for any former client of Pin
In connection with the Expert Motion, plaintiff asks the Court to seal the Of - O Case 1:19-cv-02988-ELH Document 144 Filed 03/22/22 Page 8 of 26 126-2); Of R. Christopher Rosenthal (ECF 126-3); the Response Rebuttal Expert Report Of Michael A. Terrana (ECF 126-4); and the -5). Plaintiff indicates that these exhibits should be sealed because they
Concerning the Cross Motion, defendants ask the Court to maintain seven exhibits under seal. ECF 136-2 at 1-2. They are docketed at ECF 137-1 to 137-7. Some of these exhibits were redacted by defendants, although they were still filed under seal.
une 24, 2009 - - - the - (ECF 137- -6); and
excerpts from the Purchase Agreement, filed in redacted form (ECF 137-7). ECF 136-2 at 1-2.
[exhibits] contains information that Plaintiff has designated under the Protective Order governing the productio -2 at 2. And, defendants state that Pinnacle has not waived that designation for the purpose of filing before this Court. Id. Notably, with the Defense Sealing Motion, defendants submitted email corresponde counsel. See ECF 136- reflects that
any designated exhibits be filed with the Court under seal. See id. Case 1:19-cv-02988-ELH Document 144 Filed 03/22/22 Page 9 of 26 inappropriate, in light of the , and the
Id. at 2.
A. Standard of Review Under common law, the public and the press have a qualified right to inspect all judicial records and documents. Gonzalez v. Cuccinelli, 985 F.3d 357, 376 (4th Cir. 2021); Doe v. Pub. Citizen, 749 F.3d 246, 265 (4th Cir. 2014); Va. Dep't of State Police v. Wash. Post, 386 F.3d 567, 575 (4th Cir. 2004), cert. denied, 544 U.S. 949 (2005); see also Richmond Newspapers, Inc. v. Virginia, 448 U.S. 555, 580 n.17 (1980) s have been
the public's access to judicial proceedings and the interests of the individuals in keeping the information private and of the government in ensuring Gonzalez, 985 F.3d at 376. The public Doe, 749 F.3d at 266 (quoting Rushford v. New Yorker Magazine, Inc., 846 F.2d 249,
253 (4th Cir. 1988)). Doe, 749 F.3d at 266 (citation omitted).
The common law right of access enjoyed by the press and the public is buttressed by a Rushford, 846 F.2d at 253; see Doe, 749 F.3d at 265. dment rights only if (1) closure serves a compelling
interest; (2) there is a substantial probability that, in the absence of closure, that compelling interest would be harmed; and (3) there are no alternatives to closure that would adequately protect that
compelling interest. Gonzalez, 985 F.3d at 376-77 (quoting In re Washington Post Co., 807 F.2d 383, 390, 392 (4th Cir. 1986)); see Doe, 749 F.3d at 266.
. . . . Doe, 749 F.3d at 266 (quoting Stone v. Univ. of Md. Med. Sys. Corp., 855 F.2d 178, 181 (4th Cir. 1988)). Pertinent here, the First Doe, 749 F.3d at 267 (citing Rushford, 846 F.2d at 253). Likewise, lower courts have also found that the First Amendment standard governs filings related to motions concerning the admissibility of expert testimony. See, e.g., , 425 F. Supp. 3d 204, 221 (S.D.N.Y. 2019) (explaining that documents related to Daubert judi
Louis Vuitton Malletier S.A. v. Sunny Merchandise Corp., 97 F. Supp. 3d 485, 510 (S.D.N.Y. 2015)).
The materials put at issue by the motions were filed in connection with either the S.J. Motion, the Cross Motion, or the Expert Motion. Accordingly, the more expansive First Amendment right of public access attaches to those materials.
Of relevance here, Doe, 749 F.3d at 269-70, addressed the relationship between a company's interest in protecting sensitive business records from public view and the First Amendment's thirst for sunlight. The Fourth Circuit explained, id.:
A corporation very well may desire that the allegations lodged against it in the course of litigation be kept from public view to protect its corporate image, but the First Amendment right of access does not yield to such an interest. The interests that courts have found sufficiently compelling to justify closure under the First Amendment include a defendant's right to a fair trial before an impartial jury. . . protecting the privacy rights of trial participants such as victims or witnesses . . .
and risks to national security . . . . Adjudicating claims that carry the potential for embarrassing or injurious revelations about a corporation's image, by contrast, are part of the day-to-day operations of federal courts . . . . A corporation may possess a strong interest in preserving the confidentiality of its proprietary and trade-secret information, which in turn may justify partial sealing of court records . . . . We are unaware, however, of any case in which a court has found a company s bare allegation of reputational harm to be a compelling interest sufficient to defeat the public's First Amendment right of access. In addition to the common law and the First Amendment, the Local Rules provide a complementary layer of protection for the public interest in disclosure. Local Rule 105.11 requires
factual representations to justify the sealing and (b) an explanation why alternatives to sealing
Just as a party must furnish the court with concrete reasons for a sealing request, a court must address the specific justifications for a sealing order. must (1) give the public adequate notice of a request to seal and a reasonable opportunity to
challenge it, (2) consider less drastic alternatives to sealing, and (3) if it decides to seal, state the reasons, supported by specific findings, behind its decision and the reasons for rejecting Gonzalez, 985 F.3d at 376 (citing In re Knight Publ'g Co., 743 F.2d 231, 235 (4th Cir. 1984)).
Moreover, it is immaterial that a party previously designated exhibits as Confidential or . A party does not have the right to require the court to seal judicial records. See Rushford -trial discovery may or may not be sufficient to justify proscribing the First Amendment right of access
B. Analysis I first address the Pinnacle Sealing Motion. As mentioned, plaintiff asks the Court to enter an order sealing the specified exhibits on the ground that these materials have been designated as either Confidential or Eyes Only, pursuant to the Order (ECF 58), approving the . ECF 128 at 3. Moreover, Pinnacle contends that these materials should remain under seal nd
indirect references to third- Id.
However, Pinnacle does not address whether it could protect the sensitivity of the relevant information through alternatives to filing entire exhibits under seal. It indicates only that information cannot simply be redacted because it is relevant to the central issues in this case . . . Id. at 4.
In the opposition to the Pinnacle Sealing Motion, defendants
fact that on April 30, 2021, Pinnacle sold its entire financial planning, asset and investment management business to [Congress] plaintiff prohibited from engaging in this line of work or servicing these clients as a result of certain
restrictive covenants contained in the [APA]; and (2) legally prohibited from the same as a result of its recently amended corporate management services. Id. at 2
(quoting ECF 111-6 at 2). Case 1:19-cv-02988-ELH Document 144 Filed 03/22/22 Page 13 of 26 warranting the sealing of these documents if Pinnacle is in fact legally precluded from providing services to them, let alone engag ECF 132 at 2.
e pseudonyms are employed, all information about the value of each client account can remain exposed in a document without any concern about revealing personal Id. Further ent Id. at 3 (emphasis omitted). And, defendants point out that plaintiff . . . were part of an expensive client list or have been kept secret, Id.
To begin, there is absolutely no basis to justify the sealing of the deposition transcripts or expert reports in their entirety. See ECF 126-1 (Expert Report of Rosenthal); ECF 126-2 (Expert Report of Terrana); ECF 126-3 (Rebuttal Expert Report of Rosenthal); ECF 126-4 (Supplemental Expert Report of Terrana); ECF 126-5 (Deposition Tr. of Terrana); ECF 127-1 (Deposition Tr. of Krone); ECF 127-2 (Deposition Tr. of Bruneau). These exhibits are replete with information for which sealing is totally unwarranted. See, e.g., ECF 126-1 at 15 (providing qualifications); ECF 126-2 at 4-5 (statin professional background); ECF 127-1 at 14
(Tr. at 48) (asking Krone when he resigned from Pinnacle); ECF 127-2 at 8 (Tr. at 22) (reviewing employment history).
As to ECF 127-3, which is a client list, the clients themselves may have an interest in protecting their identities and/or their financial information. They did not ask to become embroiled in the litigation, and such information may well be subject to protection. But, plaintiff offers no
ground to explain why such interests could not be adequately protected through the use of redactions or pseudonyms.
Pinnacle baldly asserts that redaction is not feasible because the information contained within these exhibits is . the Court is at a loss to understand how the centrality of the information at issue justifies sealing entire exhibits, when options less burdensome to the publ are avoidable. Therefore, I shall deny the Pinnacle Sealing Motion in part and grant it in part.
Turning to the Defense Sealing Motion, defendants report that they filed these exhibits under seal in accordance with the Order, because Eyes Only. -2 at 2. Notably, redacted versions of several exhibits were filed. See ECF 137-1; ECF 137-5; ECF 137- 6; ECF 137-7. ECF
136-2 at 3.
Plaintiff has not responded to the Defense Sealing Motion. Nor has plaintiff presented the Court with any justification as to why those exhibits that were already redacted by the defense should nonetheless remain sealed. See ECF 137-1; ECF 137-5; ECF 137-6; ECF 137-7. Moreover, Pinnacle has not explained why the remaining three exhibits, which contain excerpts from deposition transcripts, should be filed under seal in their entirety. See ECF 137-2 (Deposition Tr. of John Hill); ECF 137-3 (Deposition Tr. of Rosenthal); ECF 137-4 (Deposition Tr. of Dwight Mikulis).
Indeed, to the extent that plaintiff intended to rely on its earlier assertion to defense counsel that
-3 at 2), the contention fails because it does not address why alternatives to sealing, such as the use of redactions or pseudonyms, would be inadequate. Therefore, I shall also deny the Defense Sealing Motion in part and grant it in part.
Concerning both the Pinnacle Sealing Motion and the Defense Sealing Motion, the Clerk shall maintain the pertinent exhibits under seal, pending further instructions from the Court. In the interim, counsel shall confer as to proposed redactions for sealed exhibits that were filed without redactions, and, by April 25, 2022, jointly submit proposed redacted versions of the exhibits, suitable for public filing. If counsel cannot agree, however, then each side shall submit proposed redacted exhibits if the parties fail to submit such a request by said date, I shall direct the Clerk to lift the seal on the relevant exhibits. Further, as to ECF 137-1; ECF 137-5; ECF 137-6; and ECF 137-7, plaintiff shall advise the Court, by April 25, 2022, as to the grounds that support continued sealing of these exhibits, in light of the redactions that were already made.
IV. Substitution Motion Pinnacle has moved to substitute as the plaintiff in this suit. ECF 141-1 at 1. It maintains that substitution is appropriate in light of , Pinnacle Advisory Group, Assignor Assignee -2 at 3.
According to the Assumption Agreement, [its] right, title, and interest in [the APA], pursuant to which Assignor sold and transferred substantially
all of its assets to -2 at 3. 6
And, under the to accept all of assets and rights rel
Pursuant to the Assumption Agreement, remaining assets and liabilities are transferred to WMC. See ECF 141-2 at 3-4. In particular, the Assumption Agreement assigned all of right, title, and interest in this litigation to Waypoint Management Consulting, -1 at 2; see ECF 141-2 at 3-4 (specifying that the Assumption Agreement encompassed which Assignor has in the litigation involving Waypoint Consulting, Inc. (formerly known as Pinnacle Advisory Group Inc.) brought against the defendants Andrew J. Krone and Capital Rock Financial, LLC (d/b/a Naples Wealth Planning, which was filed on or . Further, under the Assumption Agreement, ll remaining or ECF 141-1 at 2; see ECF 141-2 at 4 Assignee hereby assumes and covenants to accept any remaining or continuing liabilities, duties and obligations of Assignor that were not covered under the APA or any Ancillary Agreement.
ECF 141-1 at 2 (citing ECF 1-2, at 7 . In particular, Pinnacle points out that the Employment Agreement s This Agreement shall extend to, and be binding upon the Employee, his legal representatives, heirs, and distributees, and upon the Company and all its successors and assigns and the term Company as used herein shall include its successors and assigns whether by merger, consolidation, combination or otherwise. -1 at 2 (quoting ECF 1-2, at 7 ).
6 The Court has not been provided with a copy of the prior agreement.
In support of the Substitution Motion, Pinnacle filed the ertification of Dwight A. Mikulis -2 at 1. He is r of Plaintiff, Waypoint Consulting, Inc. f/k/a Pinnacle Advisory Group, Inc., and the Managing Member of Waypoint Management Consulting, LLC. Id. at 1, Notably, Mikulis states that he supports the Substitution Motion. Id. at 1, 2.
D seems designed to delay the resolution of this litigation by creating more confusion and complexity
in the issues at hand, particularly on the question of standing.
A. Standard of Review Motions for substitution in light of a transfer of interest that takes place during the course of litigation are governed by Fed. R. Civ. P. 25(c). This Rule states, id.:
If an interest is transferred, the action may be continued by or against the original party unless the court, on motion, orders the transferee to be substituted in the action or joined with the original party. The motion must be served as provided in Rule 25(a)(3). In turn, Rule 25(a)(3) specifies that a motion for substitu parties as provided in Rule 5 and Accordingly, Rule 25(c) st be served on persons who are not already parties in the fashion provided in Rule 4
for service of process. [ ]
7C CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE & PROCEDURE § 1958 (3d ed. 2021) (hereinafter, WRIGHT & MILLER).
By its Benacquisto v. Am. Express Fin. Corp., 00-1980(DSD/DTS),
2021 WL 2229805, at *3 (D. Minn. May 5, 2021) (quoting Zest IP Holdings, LLC v. Implant Direct Mfg., LLC, No. 3:10-CV-0541-GPC-WVG, 2013 WL 12064538, at *3 (S.D. Cal. Jan. 23, 2013)).
In other words, service of the motion through an avenue identified by Rule 4 is sufficient to satisfy the terms of Rule 25(c). And, of import here, a party may effect service on a corporation, served] to an officer, a managing or general agent, or any other agent authorized by appointment
or by law to receiv
, DKC-02-2680, 2004 WL 1124946, at *1 (D. Md.
May 13, 2004). The primary consideration is whether substitution would facilitate the conduct of the litigation. Comm'ns Imp. Exp., S.A. v. Republic of Congo, 118 F. Supp. 3d 220, 231 (D.D.C. 2015) (quoting Citibank v. Grupo Cupey, Inc., 382 F.3d 29, 32 (1st Cir. 2004)); see also Advanced Mktg. Grp., Inc. v. Business Payment Sys., LLC, 269 F.R.D. 355, 359 (S.D.N.Y. 2010) (denying motion to substitute on the ground that .
U.S. Sec. & Exch. Comm'n v. Collector's Coffee Inc., 451 F. Supp. 3d
294, 297-98 (S.D.N.Y. 2020) (citing Potvin v. Speedway LLC, 891 F.3d 410, 416-17 (1st Cir. 2018)). This is because, irrespective merits of the case . . . are still determined vis-à- Minn. Mining
& Mfg. Co. v. Eco Chem, Inc., 757 F.2d 1256, 1263 (Fed. Cir. 1985); see also In re Covington Grain Co., Inc. relationships among parties to a suit but is designed to allow the action to continue unabated when
. Indeed, the Case 1:19-cv-02988-ELH Document 144 Filed 03/22/22 Page 19 of 26 and economy . . . prevails because Rule 25(c) has no bearing on the substantive relationship Comm ns Imp. Exp., S.A., 118 F. Supp. 3d at 231.
B. Analysis Defendants marshal three challenges to the Substitution Motion. First, they maintain that Pinnacle has not offered any evidence to suggest that the Substitution Motion was served on WMC, as required by Fed. R. Civ. P. 25(c). ECF 142 at 7-8. Further, defendants complain that p proposed substitution will further complicate the matter of standing to
, which Id. at 2. And, defendants warn that -opened, but additional discovery be conducted, which will extensively delay the resolution of this entire matter Id. In Pinnacle It maintains that it has complied with the procedural requirements of Fed. R. Civ. P. 25(c). ECF 143 at 1. With respect to Pinnacle asserts especially as Defendants neither challenge the assignability of claims under the Employment
Id. at 2. And, Pinnacle notes that there is no reason to believe that the pro conjecture. Id.
that the Court should deny the Substitution Motion on the ground that plaintiff has failed to demonstrate its compliance with the procedural requirements of Rule 25(c). They contend: the non-party it proposes to add as the substitute plaintiff, WMC, despite the explicit requirement
under Rule 25 that WMC be served -8.
As stated, Rule 25(c), by way of Rule 25(a)(3), requires that service of the motion on a nonparty in accordance with Rule 4. Indeed, the service requirement
outline Trustees of Chicago Regional Council of Carpenters Pension Fund v. Conforti Const. Co., Inc., No. 09 C 322, 2013 WL 3771415, at *1 (N.D. Ill. Jul. 17, 2013 ithout proper service of process, a court cannot exercise over a party to be joined to a suit. Id. (quoting Naylor v. Streamwood Behavioral Health Sys., No.
11 C 50375, 2012 WL 5499441, at *6 (N.D. Ill. Nov. 13, 2012). But Notably, it appears that Pinnacle did comply with the terms of Rule 4. As mentioned, a plaintiff may effect service on a limited liability corporation, such as WMC, by delivering a copy of the motion to an officer of the limited liability corporation. Fed. R. Civ. P. 4(h). And, in this case, Pinnacle provided the Court with a certification from the managing partner of WMC, Dwight Mikulis, in which FED. R. CIV. P. ECF 141-2 at 1, In my view, the submission of a certification from an officer of WMC, in which the officer expresses his support for the Substitution Motion, indicates that Pinnacle delivered the Substitution Motion to him. Generally speaking, the Federal Rules of Civil Procedure require service for the purpose of ensuring that an entity to be joined to a suit is afforded effective notice of the action. See 4 WRIGHT & MILLER . . . . [ ]
. In the consent to substitution, this is not a concern. See ECF 141-2 at 1 see also Beiersdorf, Inc. v. Outsourcing Servs., LLC,07-C-888, 2008 WL 11456225, at *1 (E.D. Wis.
Sept. 30, 2008) (explaining that only the entity to be joined to a suit pursuant to Rule 25 may object to the sufficiency of service). Accordingly, I decline to deny the Substitution Motion on this basis. Defendants also argue that the Substitution Motion should be denied because, in their view, it would risk complicating the arguments advanced in the Cross Motion (ECF 135 at 18-23) with seek enforcement of the restrictive covenants specified in Count One of the Amended Complaint. See ECF 142 at 11-14; see also -60. In particular, defendants contend that employer must have a legitimate business interest in enforcing a ECF 142 at 12. And, in order to have a legitimate b must be engaged in the same industry that it seeks to Seneca One Finance, Inc. v. Bloshuk that employer stops
And, defendants note that, pursuant to the APA, Pinnacle has sold its assets to Congress, clients at issue in this lawsuit. Id. (citing ECF 137-7). As a Further, under the terms of the Purchase Agreement, Pinnacle
industry entirely for a total of five years, and this restriction explicitly includes owning (in part or
in whole), being employed by or being affiliated with a business that is engaged in the Investment Id.
According to defendants, these developments deprive Pinnacle of a legitimate business interest in enforcing the restrictive covenants set forth in the Employment Agreement. As noted, they contend that a
Id. at 13. Moreover, they assert: As Plaintiff no longer has any legitimate business interests in the Investment Managements Services industry, it cannot transfer or assign such interests to WMC. Id. Defendants also posit: Any claim by Plaintiff to have assigned any terminated interests, including its extinguished legitimate business interests in enforcement, to Id. Pinnacle nor the impact of the Purchase Agreement on ability to participate in the investment management services industry. But, it contention that the Purchase Agreement deprives it of standing to pursue its claim for declaratory
relief. ECF 143 at 2-3. Further, Pinnacle argues that the sale of its business does not extinguish[ Id. at 3. And, it asserts: to cite to any case which stands for the proposition that a business loses its ability to enforce a
restrictive covenant against an employee who has breached an employee agreement prior to the Id.
In my view, this disagreement positions concerning the s for declaratory and injunctive relief, as set forth in their respective motions for summary judgment. See ECF 124-1 at 17-22; ECF 135 at 18-23. I am unaware of the claims at issue will bear fruit. Rather, it is sufficient for the purpose of resolving the
Substitution Motion to note that WMC has acquired terms of the Assumption Agreement.
And, even assuming the soundness of standing to seek the relief specified in the Amended Complaint, it does not follow that the proposed
substitution would . As an initial matter . are still determined vis-à- Minn. Mining & Mfg. Co., 757 F.2d at 1263. Cf. Advanced Mktg. Grp., Inc., 269 F.R.D. at 359-60 (denying motion for substitution in part because the transfer of interest any judgment imposed against [the existing defendant] because [the proposed defendant] assumed the role of the successor in interest to [the existing def , and not its liabilities). Defendants contend only that the restrictive covenants included in the APA deprived plaintiff of a legitimate business interest in the enforcement of the restrictive covenants contained within the Employment Agreement. ECF 142 at 12-13.
But, , WMC is also bound by the restrictive covenants included in the APA. Id. at 11. Further, the Assumption Agreement conferred on WMC any t, and provided that WMC has assumed continuing liabilities, duties and obligations . . . . ECF 141-2 at 3-4. Under these circumstances, WMC appears to have a legitimate business interest in the enforcement of the restrictive covenants contained within the Employment Agreement only insofar as Pinnacle did before it.
Viewing in this light, it appears that the claim will succeed or fail irrespective of whether the Substitution Motion is granted. Accordingly, granting the proposed substitution would not require defendants to advance new or alternative arguments concerning standing to enforce the Employment Agre
Finally, defendants urge the Court to deny the Substitution Motion because substitution could risk prolonging the resolution of this case. In particular, they contend that the Substitution
Motion did not indicate whether WMC consented to the Substitution Motion or whether it would According to Defendants, were WMC to refuse to do either, Id. at 9-10. this scenario, trial would not be scheduled for another year, pushing the total duration of this case
Id. at 10. not materialize. ECF 143 at 2. It claims represented by the same counsel. Neither WMC nor Pinnacle has proposed a re-opening of
proposed to substitute WMC as the plaintiff following the Assumption and Assignment Agreement Id.
As I see it attempt to prolong the litigation by seeking to reopen discovery or altering the positions Pinnacle adopted with respect to the pending motions for summary judgment. And, in any event, the Court need not grant a request to reopen discovery. Accordingly, i representations, I am persuaded that granting the Substitution Motion will not prolong the course of the litigation.
At bottom, the Assumption Agreement conclusively establishes that WMC has become the party in interest in this suit. See ECF 143-2 at 3-4. Thus, despite arguments to the contrary, substitution of WMC is appropriate. See Danaher Corp. v. Travelers Indemnity Co., 10- CV-121(JPO), 2020 WL 6712193, at *4-5 (S.D.N.Y. Nov. 16, 2020) (finding that substitution was
Accordingly, I shall grant the Substitution Motion.
V. Conclusion In light of the foregoing, I shall deny the Expert Motion, without prejudice right to renew it at a later time.
Further, with respect to the Pinnacle Sealing Motion and the Defense Sealing Motion, I shall deny them in part and grant them in part. However, for the time being, I shall direct the Clerk to maintain the relevant exhibits under seal, until otherwise instructed.
In the interim, counsel shall confer and submit, if feasible, proposed redacted versions of the pertinent exhibits, suitable for public filing, all due by April 25, 2022. If the parties cannot agree, however, then each side shall submit proposed redacted exhibits consideration. And, if no action is taken by said date, I shall instruct the Clerk to lift the seal on
the relevant exhibits. Further, as to redacted exhibits that were filed under seal, plaintiff shall submit a justification for continued sealing, due by April 25, 2022.
In addition, I shall grant the Substitution Motion. WMC shall become the named plaintiff in this suit.
An Order follows, consistent with this Memorandum Opinion.
Date: March 22, 2022 /s/ Ellen L. Hollander United States District Judge