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Rocketpower, Inc. v. Strio Consulting, Inc.

United States District Court, N.D. California

July 17, 2019

ROCKETPOWER, INC., a Delaware corporation, Plaintiff,
STRIO CONSULTING, INC., a Minnesota corporation, Defendant.




         In this action, defendant moves to dismiss the complaint or alternatively to transfer the action to the District of Minnesota. For the reasons herein, the motion to transfer is Granted.


         Plaintiff RocketPower, Inc. is a California-based corporation which provides staffing services to companies in California, Arizona, and Texas. Defendant Strio Consulting, Inc. is a Minnesota-based corporation that supplies staffing solutions in eighteen states. They entered into a non-exclusive verbal agreement in 2017. In other words, RocketPower used Strio's services for some of its clients, but not all (Dkt. Nos. 8-1 ¶ 7; 11 at 4 n.2; 11-1, Exh. 5 ¶¶ 2-3, 5-6, 10-11).

         The operative complaint references three separate contractual relationships. First, the aforementioned 2017 verbal agreement entered into by Strio and RocketPower. Second, the agreements between RocketPower and its clients. Third, the agreements between Strio/RocketPower and their recruits (Dkt. No. 11-1, Exh. 5 ¶¶ 9, 36-37, 60-61).

         The 2017 verbal agreement provided that Strio and RocketPower would split expenses and profits. RocketPower controlled the business processes. Strio managed payroll and employee benefits. Strio also helped RocketPower find recruits (id. ¶¶ 9-11, 13, 16-17).

         To illustrate, when a RocketPower client identified a hiring need, the client contacted RocketPower. In turn, both RocketPower and Strio advertised the position and solicited candidates to apply. A blended team of RocketPower and Strio employees screened applicants and extended verbal offers to selected candidates. Following the verbal offer, the same RocketPower or Strio employee who made the verbal offer then sent a written confirmation. The recruit would then be operationally controlled by a RocketPower coordinator. Strio executed the final paperwork. All of this is based on the allegations in the complaint (id. ¶¶ 12-18).

         Recruits executed one of three forms of agreement with Strio/RocketPower: (i) an “Employment Agreement”; or (ii) an “Independent Contractor Agreement”; or (iii) a “Consultant Employment Agreement” (Dkt. Nos. 8-1 Exhs. A, B; 11-3 Exhs. B, D, E). Sometimes these agreements mentioned RocketPower, sometimes they did not. In the examples of the employment and independent contractor agreements provided, RocketPower is mentioned throughout - on equal footing with Strio (Dkt. Nos. 8-1 Exhs. A, B; 11-3 Exh. B). In contrast, in the examples of the consultant agreements provided, RocketPower is never mentioned (Dkt. No. 11-3 Exhs. D, E).

         The operative complaint homed in on two particular recruits hired through the above process who executed consultant agreements. Both worked in California for two RocketPower California clients. Specifically, in January 2018, a RocketPower California-based client named Reflektive hired Christine Covert through the RocketPower/Strio partnership. In July 2018, another RocketPower California-based client named Minted hired contractor Paula-Anne Sherron through the RocketPower/Strio partnership (Dkt. No. 11-1, Exh. 5 ¶¶ 36-37, 60-67).

         The terms of the agreements with these consultants were identical. Both agreements contained covenants not to compete, Minnesota forum-selection clauses, and Minnesota choice-of-law provisions (although they both also stated that the agreement “will be governed by the law of the state in which the [s]ervices are primarily performed”). Both agreements were solely executed by a Strio Representative and the recruit. Neither form of agreement referred to RocketPower (Dkt. No. 11-3 Exhs. D, E). Nonetheless, RocketPower eventually allowed both consultants to accept employment with RocketPower's clients. Strio never waived the covenants not to compete in the recruits' agreements (Dkt. No. 11-1, Exh. 5 ¶¶ 80-82, 86-87).

         In April 2019, the relationship between RocketPower and Strio devolved into litigation with each bringing claims against the other. First, on April 17, 2019, Strio filed its complaint in the District of Minnesota against RocketPower and no one else stemming from the 2017 verbal agreement between the two companies (Dkt. No. 11-1, Exh. 1). Strio alleged breach of contract, unjust enrichment, and civil theft and conversion (id. at 6-7). Specifically, Strio accused RocketPower of holding out on paying for expenses and sharing its received profits (id. ¶¶ 29, 33-34, 37-39). On May 24, 2019, RocketPower counterclaimed - accusing Strio of breaching the 2017 verbal agreement among other claims (Dkt. No. 11-1, Exh. 3, Counterclaim ¶ 38).

         Second, on April 30, 2019, RocketPower filed this action against Strio in San Francisco Superior Court with no other defendants (Dkt. No. 11-1, Exh. 4). Strio removed (Dkt. No. 1). The operative complaint alleged four claims: (i) declaratory judgment that the non-compete provisions in the Strio/RocketPower employment/independent contractor/consultant agreements are void under California law; (ii) intentional interference with RocketPower's contractual relations with its clients (like Minted and Reflektive); (iii) negligent interference with prospective economic advantage through its relations with its clients (like Minted and Reflective); (iv) and violations of all three prongs of Section 17200 of the California Business and Professions Code (Dkt. No. 11-1, Exh. 5 at 12, 15-17).

         Strio now moves to dismiss or alternatively to transfer this action to the District of Minnesota (Dkt. No. 8). This order follows ...

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