United States District Court, E.D. Michigan, Southern Division
ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY
JUDGMENT [#10]
DENISE
PAGE HOOD, CHIEF JUDGE
I.
BACKGROUND
On
November 20, 2017, Plaintiff Integrated Management Systems,
Inc. (“IMSI”) filed a Complaint against Defendant
Mahesh Basavegowda (“Basavegowda”) alleging that
Basavegowda breached the terms of his Employment Agreement.
(Doc # 1) On October 3, 2018, IMSI filed a Motion for Summary
Judgment. (Doc # 10) Basavegowda filed his Response on
October 24, 2018. (Doc # 12) IMSI filed its Reply on November
7, 2018. (Doc # 13) Basavegowda filed a Sur-Reply on November
21, 2018. (Doc # 16)
IMSI is
a professional services and staffing firm that hires
technically trained information technology workers and
provides those workers to third-party business clients
(“end-clients”). (Doc # 1, Pg ID 2) The workers
perform their job duties on the end-clients' premises,
but are paid employees of IMSI. (Id.) Since IMSI
serves as an intermediary between the workers and the
end-clients, IMSI competes with other staffing agencies and
faces the risk of disintermediation. (Id.) IMSI
describes “disintermediation” as when end-clients
can contract directly with workers without an intermediary.
(Id.)
Some of
IMSI's employees are foreign workers in the United States
on H-1B visas. (Id.) On or around March 1, 2016,
IMSI sponsored Basavegowda for an H-1B visa and expended
thousands of dollars to bring him to the United States.
(Id. at 2-3.) The costs included: recruitment costs,
visa filing fees, lawyer fees, administrative costs, and
local agency fees. (Id. at 3.) IMSI also assisted
Basavegowda with his green card petition in 2013.
(Id.) Basavegowda's petition was approved in
2017, which enabled him to obtain permanent immigrant status
in the United States. (Id.) In order for Basavegowda
to receive his H-1B visa and green card, he was required to
obtain a skilled job. (Id.) Due to the efforts of
IMSI, Basavegowda fulfilled these requirements by obtaining
employment with one of IMSI's end-clients, SAP-Ariba, a
software and information technology services company.
(Id.)
On
April 26, 2017, Basavegowda signed an Employment Agreement
with IMSI. (Id.) Under the terms of the Agreement,
IMSI hired Basavegowda as a Programmer/Analyst at a salary of
$131, 810 annually, and provided him with medical and life
insurances. (Id.) In the
“Non-Compete/Termination” provision of the
Agreement, Basavegowda consented to “not to enter into
any employment agreement directly with IMSI's
[end-client] or through any other contract company who
provides similar services for a minimum period of 24 months
after [the] start of employment with IMSI for an
end-client.” (Doc # 1-1, Pg ID 8) Basavegowda also
agreed that should he “resign or terminate employment
with [IMSI] prior to the 24 month minimum period, in
consideration of the benefits that [he] is deriving, [he]
shall pay a lump-sum amount of liquidated damages equal to
two years of gross margin based on IMSI project billing rate
to cover for loss of business.” (Id.) IMSI
alleges that the Agreement's liquidated damages provision
was directly proportionate to the damages that IMSI would
suffer because the provision only seeks the amount of money
that IMSI would suffer from a loss of profits earned from
placing Basavegowda with SAP-Ariba. (Doc # 1, Pg ID 4)
On or
around October 27, 2017, Basavegowda resigned his employment
with IMSI and accepted direct employment with SAP-Ariba after
only approximately six months of employment with IMSI.
(Id. at 5.) IMSI claims SAP-Ariba filed for a
transfer of Basavegowda's H-1B Visa to SAP-Ariba months
before Basavegowda resigned from IMSI. (Id.) It is
now alleged by IMSI that Basavegowda breached his Agreement
by accepting employment with SAP-Ariba within 24 months after
the start of his employment with IMSI. (Id.)
IMSI
seeks monetary damages for breach of the Employment Agreement
in the amount of $112, 944, [1] reasonable attorneys' fees
and costs, and any further relief that this Court deems just
and equitable. (Doc # 10, Pg ID 62)
II.
ANALYSIS
A.
Standard of Review
Rule
56(a) of the Federal Rules of Civil Procedures provides that
the court “shall grant summary judgment if the movant
shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of
law.” Fed.R.Civ.P. 56(a). The presence of factual
disputes will preclude granting of summary judgment only if
the disputes are genuine and concern material facts.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A dispute about a material fact is
“genuine” only if “the evidence is such
that a reasonable jury could return a verdict for the
nonmoving party.” Id. Although the court must
view admissible evidence in the light most favorable to the
nonmoving party, where “the moving party has carried
its burden under Rule 56(c), its opponent must do more than
simply show that there is some metaphysical doubt as to the
material facts.” Matsushita Electric Industrial Co.
v. Zenith Radio Corp., 475 U.S. 574, 586 (1986);
Celotex Corp. v. Catrett, 477 U.S. 317, 323-24
(1986). Summary judgment must be entered against a party who
fails to make a showing sufficient to establish the existence
of an element essential to that party's case, and on
which that party will bear the burden of proof at trial. In
such a situation, there can be “no genuine issue as to
any material fact, ” since a complete failure of proof
concerning an essential element of the nonmoving party's
case necessarily renders all other facts immaterial.
Celotex Corp., 477 U.S. at 322-23. A court must look
to the substantive law to identify which facts are material.
Anderson, 477 U.S. at 248.
B.
Breach of Contract Claim
IMSI
argues that Basavegowda's alleged breach of the Agreement
is actionable because the Agreement's non-compete
provision is neither unconscionable nor excessive.
Specifically, IMSI asserts that the non-compete provision is
valid since it: (1) furthers a legitimate business interest;
and (2) has a reasonable scope. See M.C.L. §
445.774a. First, IMSI claims that its reasonable competitive
business interest is preventing disintermediation. According
to IMSI, while the Sixth Circuit has yet to set any precedent
on the topic, federal appellate courts and various state
courts have held that disintermediation is a reasonable
competitive business interest. See Consultants &
Designers v. Butler Serv. Grp., 720 F.2d 1553, 1558-59
(11th Cir. 1983).
Second,
regarding the scope of the non-compete provision, IMSI argues
that its provision is lawful pursuant to M.C.L. §
445.774a, which states that non-compete agreements are valid
if they are reasonable as to their duration, geographic area,
and the type of employment or line of business. IMSI contends
that the non-compete provision's two-year duration is a
temporal scope which Michigan courts have consistently upheld
as reasonable. Certified Restoration Dry Cleaning
Network, L.L.C. v. Tenke Corp., 511 F.3d 535, 549
(6th Cir. 2007) IMSI argues that the non-compete
provision's geographic scope is permissible since the
non-compete clause has no limiting geographic scope, which
meant that Basavegowda was free to work anywhere in the
United States. IMSI contends that the non-compete provision
does not improperly limit the ...