Synygy Inc v. ZS Assoc Inc

Opinions of the United
2009 Decisions States Court of Appeals
for the Third Circuit
6-1-2009
Synygy Inc v. ZS Assoc Inc
Precedential or Non-Precedential: Non-Precedential
Docket No. 08-2355
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
No. 08-2355
SYNYGY, INC.,
Appellant
v.
ZS ASSOCIATES, INC.
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 07-cv-03536)
District Judge: Honorable Thomas N. O’Neill, Jr.
Argued and Submitted March 12, 2009
Before: FUENTES, CHAGARES, and TASHIMA,* Circuit Judges
(Filed : June 01, 2009)
Alan S. Fellheimer (Argued)
John J. Jacko, III
Sarah K. Lessie
Fellheimer & Eichen LLP
1800 John F. Kennedy Blvd.
Suit 1400
Philadelphia, PA 19103
Counsel for Appellant
*
Honorable A. Wallace Tashima, Senior Judge of the United States
Court of Appeals for the Ninth Circuit, sitting by designation.
Diane Siegel Danoff (Argued)
Joseph R. Heffern
Dechert LLP
18 th Floor, Cira Centre
2929 Arch St.
Philadelphia, PA 19104
Counsel for Appellee
OPINION
TASHIMA, Circuit Judge.
Plaintiff Synygy, Inc. (“Synygy”), a Pennsylvania corporation with an affiliate in
Pune, India, brought this action against ZS Associates, Inc. (“ZS Associates”), an Illinois
corporation also with an affiliate in Pune, alleging various state and federal claims related
to trade secret misappropriation. The District Court dismissed the action on the grounds
of forum non conveniens, as well as for a failure to join necessary and indispensable
parties under Federal Rule of Civil Procedure 19 (“Rule 19”). We have jurisdiction under
28 U.S.C. § 1291, and will vacate and remand.
I.
In 2007, Synygy filed a complaint against ZS Associates in the Eastern District of
Pennsylvania, alleging that ZS had misappropriated Synygy’s trade secrets and tortiously
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interfered with its business relationships. Specifically, Synygy alleged that ZS Associates
hired at least two former Synygy employees—in violation of their non-compete and non-
disclosure agreements—and used their information to replace Synygy as the provider of
sales compensation management services to Schering-Plow, a pharmaceutical company
headquartered in New Jersey. Synygy alleged claims for misappropriation of trade
secrets, conversion of intellectual property, intentional interference with prospective
business relations, unfair competition, unjust enrichment, inevitable disclosure, and
violations of the Lanham Act, 15 U.S.C. § 1125 et. seq. Synygy sought legal and
equitable relief, including an injunction to prevent ZS Associates from using Synygy’s
intellectual property, hiring Synygy employees, or doing business with Schering-Plough.
ZS Associates moved for dismissal on the grounds of forum non conveniens and a
failure to join necessary and indispensable parties under Rule 19. ZS Associates
submitted affidavits suggesting that: (1) the former employees had in fact only worked
for Synygy India Pvt. Ltd. (“Synygy India”), an affiliate of Synygy in Pune; (2) the
employees then left Synygy India to work for ZS Associates India Pvt. Ltd. (“ZS India”),
an Indian entity separate from ZS Associates; (3) Synygy India had already filed suit
against its former employees in India; and (4) India offered a better forum to hear
Synygy’s complaint in the present case.
On the basis of this evidence, ZS Associates argued for dismissal on forum non
conveniens grounds, because India offered a convenient and adequate alternative forum to
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hear the matter, and ZS Associates had already consented to jurisdiction there. ZS
Associates also argued that the former Synygy India employees were necessary and
indispensable parties under Rule 19, but were not amenable to service in the United
States, necessitating dismissal.
The District Court agreed, dismissing Synygy’s complaint and the action on both
grounds in a terse order. It found that the former employees were necessary and
indispensable parties, because their “ability to protect their interests will be impaired or
impeded” by the action, and because adjudicating the case would require determining the
validity of their non-disclosure and non-compete agreements, a determination that
“cannot be made without the former employees.” The District Court also dismissed on
forum non conveniens grounds, because the “the connections to India are substantial” and
the State of Pennsylvania had little interest in the matter.
III.
We conclude that this short analysis was insufficient to support dismissal on either
ground.
When considering a motion for dismissal on the grounds of forum non conveniens,
a court must address: (1) the availability of an adequate alternative forum; (2) the amount
of deference due the plaintiff’s forum choice; (3) the private interest factors; and (4) the
public interest factors. Lony v. E.I. Du Pont de Nemours & Co., 886 F.2d 628, 633 (3d
Cir. 1989) (Lony I). The court’s conclusions on each of these elements must be
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“sufficiently detailed and supported by the record.” Lacey v. Cessna Aircraft Co., 862
F.2d 38, 39 (3d Cir. 1988) (Lacey I). If the district court fails to “supply specific reasons
and develop adequate facts to support its decision,” we cannot adequately review the
order of dismissal; consequently, we will vacate and remand for further consideration. See
id. at 43. In this case, the District Court did not properly evaluate the myriad issues raised
in the motions.
For example, on the first element, the availability of an alternative forum, the
District Court simply stated that India was an adequate forum. It failed to analyze—and
on remand should consider—several issues, including: (1) whether India recognizes the
causes of action in this suit, or their analogues; (2) what forms of relief are available to
Synygy in India if it proves its claims; (3) whether such relief could be enforced in the
United States; (4) whether ZS Associates is subject to jurisdiction in India; (5) if not,
whether its consent to jurisdiction is legally sufficient; and (6) whether any dismissal
should be conditioned on such consent. See, e.g., Del Monte Fresh Produce Co. v. Dole
Food Co., 136 F. Supp. 2d 1271, 1276-78 (S.D. Fla. 2001) (evaluating adequacy of Costa
Rica as a forum in an intellectual property dispute between American companies
requiring injunctive relief in the United States); see also Bhatnagar v. Surrendra
Overseas Ltd., 52 F.3d 1220, 1227 (3d Cir. 1995) (explaining that for forum to be
adequate defendant must be amenable to process there and remedies offered in that forum
are not clearly unsatisfactory).
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Similarly, on the second element, the District Court failed to state what, if any,
deference it extended to Synygy in its forum choice. This is particularly important,
because the parties dispute whether Synygy should be treated as an American company,
and thereby given great deference in its choice of an American forum, or as a foreign
entity, entitling it to less deference. See, e.g., Wiwa v. Royal Dutch Petroleum Co., 226
F.3d 88, 101-03 (2d Cir. 2000) (noting different levels of deference due foreign versus
domestic plaintiffs); Lony I, 886 F.2d at 634 (chastising lower court for doing “little
beyond restating the rule [on deference] and filling in the names of the parties”).
The District Court’s discussion of the private interest factors similarly failed to
consider, among other issues, the location of evidence of misappropriation (which Synygy
alleges is in the United States, where ZS Associates managed its global operations), the
ease of access to such evidence in both forums, and the availability of process to ensure
the cooperation of non-parties, such as Schering-Plow. See Lacey I, 862 F.2d at 46-47
(detailing the necessary scope of district court’s inquiry); Lacey v. Cessna Aircraft Co.,
932 F.2d 170, 183-86 (3d Cir. 1991) (Lacey II) (same).
Among the public interest factors the District Court neglected to consider were
choice-of-law issues, any administrative problems associated with hearing the suit in the
United States, and the interests of Pennsylvania in adjudicating the case. See Piper
Aircraft Co. v. Reyno, 454 U.S. 235, 241 n.6 (1981). The District Court did conclude that
Pennsylvania does not have a significant interest in hearing the case, but neglected to
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consider Pennsylvania’s interest in affording relief to its own ostensible corporate citizens
such as Synygy.
On remand, the District Court should carefully evaluate these issues, as well as
any others needed to resolve the principal points of contention between the parties.
The District Court should similarly reconsider its Rule 19 dismissal. A District
Court must conduct a two-step inquiry before granting a Rule 19 dismissal, considering
first whether an absent party is “necessary” under Rule 19(a), and then, if the party is
necessary but cannot be joined, determining whether the party is “indispensable” such
that the action must be dismissed in his or her absence. Gen. Refractories Co. v. First
State Ins. Co., 500 F.3d 306, 312 (3d Cir. 2007).
The District Court conflated these inquiries. It found that the interests of the
former employees could be “impaired or impeded” by the present action, but failed to
explain what those interests are or how the suit could jeopardize them—other than to note
that the employees may face “inconsistent conclusions” about the lawfulness of their
current employment.
Even assuming the employees were necessary parties who could not be joined, the
District Court did not then sufficiently evaluate the factors in Rule 19(b) that establish
indispensability, including, inter alia, the deleterious effect on the former employees of a
judgment rendered in their absence, and whether such harms could be lessened by
shaping the proceedings or the relief. See Fed. R. Civ. P. 19(b)(1)-(4); see also Gen.
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Refractories, 500 F.3d at 320; Provident Tradesmens Bank & Trust Co. v. Patterson, 390
U.S. 102, 118-19 (1968) (“The decision whether to dismiss (i.e., the decision whether the
missing person is ‘indispensable’) must be based on factors varying with the different
cases, some such factors being substantive, some procedural, some compelling by
themselves, and some subject to balancing against opposing interests.”).
On remand, the District Court should carefully perform this two-step analysis.
IV.
For the reasons set forth above, we will vacate the order of dismissal and remand
the matter to the District Court for reconsideration in light of this opinion.1
1
In light of this disposition, it is unnecessary to decide whether the
District Court erred in not extending discovery on jurisdictional issues.
On remand, the District Court should determine whether limited
jurisdictional discovery would aid the parties and the court in resolving
the forum non conveniens and Rule 19 issues.
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