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Integrated Management Systems, Inc. v. Basavegowda

United States District Court, E.D. Michigan, Southern Division

August 16, 2019




         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 ...

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