United States District Court, S.D. California
ORDER DENYING MOTION TO STAY; GRANTING LEAVE TO FILE THIRD-PARTY COMPLAINT
JEFFREY T. MILLER, District Judge.
Counterclaimant and Defendants Jett Integration, Inc. ("Jett") and Jeff Ott ("Ott") move to stay this action or, alternatively, to file a Third-Party Complaint to Name Jeff Sodeman as a third-party defendant. Plaintiff and Counterdefendant Three Rivers Provider Network, Inc. ("TRPN") opposes both motions. Pursuant to Local Rule 7.1(d)(1), the court finds the matters presented appropriate for decision without oral argument. For the reasons set forth below, the court denies the motion to stay and grants the motion to file an amended counterclaim.
On October 11, 2013, in the United States District Court for the District of Nevada, TRPN commenced this action seeking legal, equitable, and injunctive relief. On October 30, 2014, the action was transferred to the present judicial district pursuant to a forum selection provision in an agreement between the parties.
The complaint alleges eight claims for relief: declaratory relief, breach of contract, civil conspiracy to breach fiduciary duty, fraud, civil conspiracy/conversion of corporate funds, civil conspiracy/conversion of corporate property, civil RICO, and unjust enrichment. (Ct. Dkt. 1). The following allegations overlap with those in two related cases, one a federal criminal prosecution pending in this judicial district, United States of America v. Blaine Pollock, Case No. 12cr4599 MMA, (the "Federal Criminal Action"), and the other pending in the Superior Court of the State of California for the County of San Diego, Three Rivers Provider Network, Inc. v. Ronson Shamoun, Todd Breeden, and Law Offices of Ronson Shamoun, Case No. 37-2012-00090505-CU-BT-CTL (the "State Action"), as more fully discussed below. The Complaint
TRPN is a Nevada corporation with its principal place of business in Henderson, Nevada. TRPN is in the technology hosting services business. Among other things, the software used by TRPN "contains highly sensitive data, including medical records of patients, billing records of providers, rates of repayment with medical providers, rates of reimbursement to clients, and a wide range of sensitive, private, privileged and trade secret data." (Compl. ¶5). Prior to 2007 TRPN used a third-party hosting company "to protect and safeguard TRPN's access to the software and technology services needed to effectuate the everyday aspects of the business." Id.
In 2007 a former Chief Operating Officer ("COO") of TRPN, Todd Breeden, and Jeff Ott, then an employee of the company retained to host TRPN's technology services, allegedly represented to TRPN that the hosting company could no longer provide the services required by TRPN and was unilaterally terminating the servicing arrangement. (Compl. ¶6). TRPN alleges that the representations were a "lie, " and that Breeden himself terminated the contract and then conspired with Ott to "use control over the technology accessed and used by TRPN to loot the company of millions of dollars, essential trade secrets, and software systems." Id.
Breeden, Ott, and Jett allegedly "promised to safeguard the trade secrets of the company by hosting its technology and servers." TRPN alleges that it was over-billed by about $1.2 million "in order to fund a competitor business Breeden and Ott would co-own." (Compl. ¶7). In order to make the conspiracy work, TRPN alleges that "Ott needed to misuse his access to the technology to enable Breeden to steal the trade secrets of the business, including client rate data, client contractual terms, customer contractual terms, software access terms, and other trade secrets of the business." (Compl. ¶8).
In order to obtain TRPN's trade secrets, in 2010, Ott met with Jeff Sodeman, discussed the objectives of the alleged conspiracy, and "used Sodeman to steal the code of the technology." ¶9). In 2011, Breeden caused TRPN to hire Sodeman as someone who could "upgrade" TRPN's technology but, in reality, Sodeman would misappropriate the technology. In the summer of 2011, Sodeman left his employment position with TRPN and began working for the competitor business created by Breeden and Ott, America's Choice Provider Network ("ACPN"). Sodeman received a salary of $200, 000 per year and 8% ownership of ACPN - a company that both Breeden and Ott allegedly believed could be worth about $100, 000, 000 by 2012.
TRPN alleges that Ott controlled more than 40% of the shares of ACPN. Ott allegedly used the stolen technology from TRPN to capitalize ACPN and enable "Breeden to steal trade secrets... and practically all of the company's intellectual property and licenses, to put ACPN on equal' footing with TRPN." (Compl. 10).
Not only did Ott allegedly conspire with Breeden to misappropriate TRPN's trade secrets and technology, but he also allegedly conspired with Breeden's attorney, Ronson Shamoun, "to falsify allegations against TRPN, with the intention of causing TRPN to fail, and promising third party potential investors in ACPN that they could cause TRPN's failure and then step in the shoes' of TRPN." (Compl. ¶12). At about this same time, Jett, through Ott, allegedly "lied to TRPN, telling TRPN officers he had nothing to do with ACPN or any competitor business." (Compl. §13). TRPN alleges that Breeden paid Shamoun more than $373, 000 in legal fees from TRPN funds which "in fact were intended to and did, capitalize a competitor business of TRPN. Shamoun owns 10% of ACPN through his wife, and further provides office space for ACPN in a building owned by him, purchased by moneys paid to him from TRPN." (Compl. ¶15).
On May 14, 2014, Jett filed a countercomplaint alleging three claims for relief: breach of the Managed Services Contract, breach of the Hosting Services Contract, and breach of the covenant of fair dealing and good faith. (Ct. Dkt. 35). Jett alleges that it entered into two different contracts with TRPN, one called a Managed Services Contract and the other called a Hosting Services Contract. Jett alleges that it complied with its contractual ...