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LLC v. B2K Systems, LLC

Supreme Court of Alabama

September 12, 2014

Ex parte B2K Systems, LLC; Ingenuity International, LLC; and Robert A. Przybysz; In re: Nannette Smith
B2K Systems, LLC; Ingenuity International, LLC; and Robert A. Przybysz

Released for Publication May 15, 2015.

Petition for Writ of Mandamus, Jefferson Circuit Court, CV-14-00163. Tom King, Jr., Trial Judge.


For Petitioners: Lynne Stephens O'Neal, Jim H. Wilson, Leitman, Siegal, Payne & Campbell, P.C., Birmingham.

For Respondent: Jason L. Yearout, J. Gusty Yearout, Yearout & Traylor, PC, Birmingham.

MAIN, Justice. Stuart, Bolin, Parker, Murdock, Shaw, Wise, and Bryan, JJ., concur. Moore, C.J., concurs in part and dissents in part.


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MAIN, Justice.

B2K Systems, LLC, a Delaware limited-liability company; Ingenuity International, LLC, a foreign corporation (" Ingenuity" ); and Robert A. Przybysz (hereinafter referred to collectively as " the petitioners" ) petition for a writ of mandamus seeking enforcement of an outbound forum-selection clause and the reversal of a preliminary injunction entered by the Jefferson Circuit Court. With respect to the forum-selection-clause issue, we deny the petition. With regard to the preliminary injunction, we treat the petition as a timely filed direct appeal pursuant to Rule 4(a), Ala. R. App. P.,

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and we reverse and remand.

I. Facts and Procedural History

This matter arises from a business dispute. The respondent, Nannette Smith, was the founder and president of, and the sole shareholder in, B2K Systems, Inc. (" B2K Inc" ), a Birmingham-based Alabama corporation that developed specialized software for point-of-sale retailers. In August 2012, B2K Inc sold its assets to B2K Systems, LLC (" B2K LLC" ), a Delaware corporation set up for the purpose of acquiring B2K Inc's assets. The purchase price totaled $6,900,000, with B2K Inc to receive an initial payment of $200,000 and the remainder to be paid in monthly installments to B2K Inc and as salaries paid to Smith and her son, Josh Smith. Although the purchase price was to be paid incrementally, according to the asset-purchase agreement B2K Inc's assets, including its intellectual property, were to be transferred to B2K LLC immediately upon closing in September 2012.

The asset-purchase agreement referenced various " related agreements" to be executed as part of the purchase. Those related agreements included a promissory note to be executed by B2K LLC in favor of Smith and a guarantee of that note executed by Ingenuity, a holding company owning the majority shares of B2K LLC. The asset-purchase agreement also called for B2K LLC and Smith to execute a five-year employment agreement naming Smith president of B2K LLC and providing an annual base salary of $200,000. Smith was also granted 20% ownership of B2K LLC.

On September 1, 2012, Przybysz, the managing member and CEO of B2K LLC and Ingenuity, executed the promissory note on behalf of B2K LLC and the guaranty agreement on behalf of Ingenuity. That same day, B2K LLC and Smith entered into the employment agreement, pursuant to which Smith became president of B2K LLC. Each agreement -- the asset-purchase agreement, the employment agreement, the promissory note, and the guaranty agreement -- contained a forum-selection clause. Although the scope of the forum-selection clauses are in dispute, they, at the least, established Kent County, Michigan, as a permissible forum for resolution of disputes arising from the various agreements. All the agreements provided that the law of the State of Delaware would govern.

Following the purchase, relations between Smith and B2K LLC deteriorated. B2K LLC stopped making the monthly payments on the promissory note. On March 3, 2014, Przybysz, as the managing member of B2K LLC, acted to terminate Smith's employment with B2K LLC. Przybysz met with Smith in B2K LLC's Birmingham office and handed her a termination letter, which explained that the termination of her employment was " for cause." The same day, B2K LLC filed for and received a temporary restraining order (" TRO" ) from the Kent, Michigan, Circuit Court. The TRO enjoined Smith from

" (a) entering onto any premises owned, leased, and/or operated by [B2K LLC]; (b) contacting [B2K, LLC]'s employees, vendors, and/or current customers, (c) using or disclosing [B2K LLC]'s confidential information, including passwords, logins, and/or client lists; and (d) soliciting any business from [B2K LLC]'s current clients and customers."

Along with its request for the TRO, B2K LLC filed a complaint in the Kent Circuit Court alleging Smith had misrepresented the status of B2K LLC's projects, had squandered resources on nonapproved budgeted expenses, had misappropriated funds and equipment, had prepared fraudulent

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expense reports, had sent fraudulent invoices to clients, and had misrepresented insurance records. The complaint alleged breach of Smith's employment agreement with B2K LLC, breach of fiduciary duty, and breach of the asset-purchase agreement.

On March 4, 2014, the day after the Michigan TRO was issued, Smith filed a complaint and a petition for a TRO in the Jefferson Circuit Court (" the trial court" ), seeking her own TRO against the petitioners and also seeking monetary damages for breach of the employment contract and the promissory note. Smith's complaint alleged that B2K LLC had failed to make the monthly payments required under the note and that B2K LLC had failed to honor her employment agreement. Smith requested a TRO restraining the petitioners as follows:

" a. Precluding the [petitioners] from entering, visiting, or otherwise disturbing the business of B2K LLC and any other business located on the premises of [B2K LLC's office location];
" b. Precluding the [petitioners] from removing any assets, tangible or intangible, including software, hardware, property, intellectual property, or any other asset contemplated by the purchase agreement referenced herein;
" c. Precluding the [petitioners] from enforcing the out-of-state order;
" d. Precluding the [petitioners] from copying, scanning, altering, changing, running, removing, using, destroying, and/or wasting any code, intellectual property, software, passwords, computer programs, computers, servers, tablets, printers, cds, storage devices, flash drives, external storage, internal storage, hard drives, external hard drives, USB drives, or any other item that stores information;
" e. Further, the [petitioners] shall be precluded from interfering with [Smith] and any other employees of B2K LLC from the normal operation of their business including the use of the assets in the furtherance of the business;
" f. The [petitioners] are precluded from terminating Smith from her employment without cause until a hearing on the merits may be had;
" g. All parties shall maintain the status quo until such time as a hearing on the merits can be preformed and a trial on the merits for the other claims obtained;
" h. Any other and further relief that this Court deems appropriate."

On March 4, the trial court issued the TRO and set a hearing on a preliminary injunction for March 12, 2014. That same day, the petitioners moved to dissolve the TRO and to dismiss Smith's lawsuit, arguing, in part, that under the various forum-selection clauses contained in the parties' agreements, either the Kent, Michigan, Circuit Court or the United States District Court for the Western District of Michigan were the exclusive forums for Smith's lawsuit. On March 10, Smith filed a response in opposition to the petitioners' motion to dismiss. Smith argued that venue in the trial court was proper, that the forum-selection clauses were permissive rather than mandatory, and that Michigan was a seriously inconvenient forum. On March 11, 2014, Smith filed an amended complaint adding two additional claims, one alleging breach of the asset-purchase agreement and another alleging breach of the guaranty agreement.

On March 12, 2014, the trial court conducted an evidentiary hearing, which included the testimony of Smith, Przybysz,

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and other witnesses. On March 26, 2014, the trial court issued a preliminary injunction. In its order, the trial court addressed and rejected the petitioners' argument that Michigan was the proper forum for the dispute. The trial court noted that the forum-selection clauses were " inartful" ...

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