United States District Court, N.D. Alabama, Southern Division
OWEN BOWDRE, CHIEF UNITED STATES DISTRICT JUDGE.
proverb goes, “All is fair in love and war.” But
does Alabama tort law agree?
battle for Alabama's physical therapy market, Plaintiff
Physiotherapy Associates, Inc. alleges Defendant ATI
Holdings, LLC and its subsidiaries aided and abetted an
employee's breach of fiduciary duties and duty of
loyalty, misappropriated Physiotherapy's trade secrets,
and intentionally interfered with several of
Physiotherapy's contractual and business relationships.
(Doc. 29). In its motion to dismiss now before this court,
ATI contends that nothing it did to woo away
Physiotherapy's employees, clients, and referral sources
violated the law and that all of Physiotherapy's claims
fail. (Docs. 32 & 33). For the reasons stated below, the
court finds ATI's arguments only partially convincing and
WILL GRANT IN PART and DENY IN PART ATI's motion to
DeLoach worked for Plaintiff Physiotherapy, an outpatient
rehabilitation services company, from February 2013 until
October 2016, at which time he voluntarily left to work for
ATI, a direct competitor of Physiotherapy that was looking to
enter the Alabama market. (Doc. 29 at ¶¶ 11, 25).
months prior to leaving Physiotherapy, Mr. DeLoach and ATI
allegedly began communicating about Mr. DeLoach's
potential employment with ATI. (Doc. 29 at ¶ 16). These
communications included Mr. DeLoach sending ATI a memo
entitled “Denovo and Acquisition Strategy, ”
which included suggested geographic areas for ATI to either
acquire or open clinics. (See Doc. 33-2). DeLoach
subsequently resigned from his position with Physiotherapy
and went to work for ATI. (Doc. 29 at ¶¶ 24-25,
December 2016, Physiotherapy filed a lawsuit against Mr.
DeLoach in the Northern District of Alabama,
Physiotherapy v. DeLoach, No. 1:16-cv-2014-ACA (N.D.
Ala., Dec. 15, 2016). In DeLoach, Physiotherapy
alleged Mr. DeLoach breached his employment contract by
soliciting Physiotherapy's clients, referral sources, and
employees on ATI's behalf, as well as helping ATI compete
against Physiotherapy within a prohibited market area. During
the pendency of Deloach, ATI filed a motion to amend
its complaint, seeking to add ATI as a defendant and to add
new claims. Judge Axon denied the motion to amend because
Physiotherapy had not shown good cause for failing to amend
its complaint sooner.
its motion for leave to amend was denied, Physiotherapy filed
the instant action against ATI in the Jefferson County
Circuit Court, which ATI removed to this court on July 21,
2017. (Doc. 1). ATI moved to stay this case pending
resolution of the case filed against Mr. DeLoach, which this
court granted on October 16, 2017. (Doc. 15).
Axon entered judgment for Mr. DeLoach and against
Physiotherapy on all its claims on September 17, 2018.
Physiotherapy Assocs., Inc. v. DeLoach, No.
1:16-CV-2014-ACA, 2018 WL 4409349 (N.D. Ala. Sept. 17, 2018).
Judge Axon found that Physiotherapy had failed to produce
evidence sufficient to create a question of fact regarding
whether Mr. DeLoach breached his non-solicitation agreement
by soliciting Physiotherapy's employees. Id. at
also concluded that Mr. DeLoach did not violate his
employment contract by soliciting Physiotherapy's
customers because the employment contract's poor drafting
defined Physiotherapy's customers to be Physiotherapy
itself. Id. at *6. Finally, Judge Axon concluded
that Mr. DeLoach did not breach his non-compete clause
because the contract did not prohibit him from helping
competitors “prepare to compete, ” which was the
extent of Mr. DeLoach's activity before the non-compete
clause expired. Id. at *8.
entry of the judgment in the DeLoach case, this
court lifted the stay in this matter on October 3, 2018.
(Doc. 27). Physiotherapy filed its amended complaint on
November 16, alleging six counts against ATI: aiding and
abetting Mr. DeLoach's breach of fiduciary duties and
duty of loyalty (Count I); violation of the Alabama Trade
Secrets Act (Count II); tortious interference with
Physiotherapy's business and contractual relationships
with customers (Count III), employees (Count IV), and Mr.
DeLoach (Count V); and civil conspiracy (Count VI) to commit
the violations described in Counts I-V. (Doc. 29).
filed its answer on November 30 and asserted the
complaint's failure to state a claim upon which relief
can be granted as its “First Defense.” (Doc. 30
at 10). Almost three months later, on February 18, 2019, ATI
filed the motion to dismiss now before this court, in which
it moved to dismiss each of Physiotherapy's claims. (Doc.
32). After reviewing the parties' briefs on the issues
and for the reasons stated below, the court WILL GRANT IN
PART and DENY IN PART Defendant ATI's motion to dismiss.
Standard of Review
12(b)(6) motion to dismiss attacks the legal sufficiency of
the complaint. Generally, the Federal Rules of Civil
Procedure require only that the complaint provide
“‘a short and plain statement of the claim'
that will give the defendant fair notice of what the
plaintiff's claim is and the grounds upon which it
rests.” Conley v. Gibson, 355 U.S. 41, 47
(1957) (quoting Fed.R.Civ.P. 8(a)). A plaintiff must provide
the grounds of its entitlement, but Rule 8 generally does not
require “detailed factual allegations.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting
Conley, 355 U.S. at 47). It does, however,
“demand more than an unadorned,
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
Pleadings that contain nothing more than “a formulaic
recitation of the elements of a cause of action” do not
meet Rule 8 standards nor do pleadings suffice that are based
merely upon “labels or conclusions” or
“naked assertions” without supporting factual
allegations. Twombly, 550 U.S. at 555, 557.
Supreme Court explained that “[t]o survive a motion to
dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is
plausible on its face.'” Iqbal, 556 U.S.
at 678 (quoting and explaining its decision in
Twombly, 550 U.S. at 570). To be plausible on its
face, the claim must contain enough facts that “allow
the court to draw the reasonable inference that the defendant
is liable for the misconduct alleged.” Iqbal,
556 U.S. at 678. Although “[t]he plausibility standard
is not akin to a ‘probability requirement, '”
the complaint must demonstrate “more than a sheer
possibility that a defendant has acted unlawfully.”
Id. “Where a complaint pleads facts that are
merely consistent with a defendant's liability, it
‘stops short of the line between possibility and
plausibility of entitlement to relief.'”
Id. (quoting Twombly, 550 U.S. at 557). If
the court determines that well-pleaded facts, accepted as
true, do not state a claim that is plausible, the claim must
be dismissed. Id.
previously stated, Physiotherapy's amended complaint
includes six counts: one count of aiding and abetting breach
of fiduciary duty and duty of loyalty; one count of violation
of the Alabama Trade Secrets Act; three counts of intentional
interference with contractual/business relations; and one
count of civil conspiracy to commit the other five counts.
(Doc. 29). ATI moves to dismiss each count, and this
Memorandum Opinion addresses each one in turn. But it must
first address threshold issues the parties raise regarding
the timeliness of ATI's motion and collateral estoppel.
Timeliness of ATI's Motion to Dismiss
initial matter, Physiotherapy argues the court should deny
ATI's entire motion to dismiss as procedurally defective,
because ATI filed the motion nearly three months
after it filed an answer to the amended complaint.
(Doc. 38 at 4-5). Physiotherapy cites Fed.R.Civ.P. 12(b),
which states that a “motion asserting any of these
defenses must be made before pleading if a
responsive pleading is allowed.” Despite the technical
correctness of Physiotherapy's timeliness argument, the
court accepts ATI's filing.
a Rule 12(b) motion must be filed before a responsive
pleading, a party can still properly raise the defense of
failure to state a claim after an answer in a Federal Rule of
Civil Procedure 12(c) motion for judgment on the pleadings.
See Fed. R. Civ. P. 12(h) (stating that the defense
of failure to state a claim may be raised by a motion under
Rule 12(c) and is not waived by the failure to raise the
defense in a responsive pleading). Considering Rule 12(h),
the Eleventh Circuit has noted that an untimely Rule 12(b)(6)
motion “may be construed as a request for
judgment on the pleadings pursuant to [Rule] 12(c).”
Skrtich v. Thornton, 280 F.3d 1295, 1307 n. 13 (11th
Cir. 2002) (emphasis original); see also Whitehurst v.
Wal-Mart Stores East, L.P., 329 Fed.Appx. 206, 208 (11th
Cir. 2008) (per curiam) (rejecting plaintiff's
argument that Rule 12(b)(6) motion was untimely because the
court could construe it as a Rule 12(c) motion).
the court analyzes a Rule 12(c) motion for judgment on the
pleadings the same way as a Rule 12(b)(6) motion to dismiss
for failure to state a claim upon which relief can be
granted. See Dial v. City of Bessemer, No.
2:14-CV-1297-RDP, 2016 WL 3054728, at *3 (N.D. Ala. May 31,
2016) (“A Rule 12(c) motion to judgment on the
pleadings is analyzed the same as a Rule 12(b)(6) motion to
dismiss.”). As such, whether the court construes
ATI's motion as a motion to dismiss under 12(b)(6) or a
motion for judgment on the pleadings under 12(c) has no
impact on the court's analysis. See Jones v.
Greninger, 188 F.3d 322, 324 (5th Cir. 1999) (holding
“the district court did not err when it construed the
defendants' motion as one for judgment on the
pleadings”). Finally, while ATI filed its motion to
dismiss after its answer, ATIs argument is not new because it
included the grounds of its motion to dismiss in its answer.
(Doc. 30 at 10). In the interests of judicial economy, the
court construes ATI's motion as a timely Rule 12(c)
motion for judgment on the pleadings.
Scope and Impact of Judge Axon's Summary Judgment Ruling
in Related Case
ATI contends that summary judgment against Physiotherapy in
the DeLoach case estops Physiotherapy from now
alleging similar claims against ATI. Physiotherapy argues
that collateral estoppel does not apply in this case and
that, even if it did, the court's prior factual
determinations in Deloach do not preclude any of its
claims against ATI.
Eleventh Circuit, “federal common law borrows the
state rule of collateral estoppel to determine the
preclusive effect of issues decided by a federal court that
exercised diversity jurisdiction.” CSX
Transportation, Inc. v. Gen. Mills, Inc., 846 F.3d 1333,
1340 (11th Cir. 2017) (emphasis in original). The
DeLoach court exercised diversity jurisdiction over
the matter, so this court must determine whether
Alabama's doctrine of collateral estoppel applies to
preclude this suit.
doctrine of collateral estoppel requires “(1) an issue
identical to the one litigated in the prior suit; (2) that
the issue was actually litigated in the prior suit; (3) that
resolution of the issue was necessary to the prior judgment;
and (4) the same parties.” Stinnett v.
Kennedy, 232 So.3d 202, 219-20 (Ala. 2016) (quoting
Dairyland Ins. Co. v. Jackson, 556 So.2d 723, 726
motion identifies at least seventeen findings of fact and
conclusions of law from the DeLoach ruling that it
purports command preclusive effect under Alabama's
doctrine of collateral estoppel. (Doc. 33 at 10-11; Doc. 39
at 5-7). Physiotherapy, on the other hand, contends the court
only determined five issues possibly subject to collateral
estoppel, and that it does not seek to re-litigate any of
them in this case. (Doc. 38 at 7).
court notes that the DeLoach case concerned only Mr.
DeLoach's contractual liability.
DeLoach, 2018 WL 4409349, at *4 (“Mr. DeLoach
asks the court to enter summary judgment in his favor on
Physiotherapy's breach of contract claims.”)
(emphasis added). Here, Physiotherapy's claims chiefly
stem from Mr. DeLoach's alleged fiduciary duties and duty
of loyalty, not his contractual duties. (Doc. 29 at ¶
40). But Physiotherapy's complaint still references Mr.
DeLoach's contractual duties to Physiotherapy as at least
partial basis for ATI's liability in this action. For
example, Physiotherapy alleged that ATI intentionally
interfered with the relationships between Physiotherapy and
its employees by “utilizing DeLoach to solicit
Physiotherapy's employees in violation of his legal and
contractual duties.” (Doc. 29 at ¶ 59).
Physiotherapy also alleged that ATI intentionally employed
DeLoach to solicit Physiotherapy's employees in violation
of his contract and that ATI and DeLoach acted together to
violate contractual and legal duties to Physiotherapy. (Doc.
29 at ¶¶ 64-65, 69). So, to the extent
Physiotherapy attempts to base its claims against ATI on
Deloach's contractual obligations that the ruling in
DeLoach determined did not exist or contractual
violations that the ruling determined did not occur, the
court finds those issues identical to ones litigated in the
court also finds those issues to have been actually litigated
and necessary to the prior judgment, pursuant to the second
and third elements of collateral estoppel. Physiotherapy had
its opportunity to argue that its employment agreement with
Mr. DeLoach restricted him from soliciting Physiotherapy
customers; it failed. DeLoach, 2018 WL 4409349, at
*6-8 (interpreting the non-solicitation provision to define
Physiotherapy's “customers” as Physiotherapy
itself, precluding claims that Mr. DeLoach violated that
provision). Physiotherapy also had its opportunity to argue
that Mr. DeLoach violated the agreement by soliciting
Physiotherapy employees; again, it failed. DeLoach,
2018 WL 4409349, at *5-6 (“Mr. DeLoach is entitled to
summary judgment on Physiotherapy's breach of contract
claim to the extent the claim is based upon his alleged
solicitation of Physiotherapy's employees.”).
attempts to narrow those prior determinations to a specific
customer and employee-i.e., Physiotherapy construes the
DeLoach court to have concluded that “Andrews
Group was not Physiotherapy's customer as defined in
the contract” and that “there was
insufficient evidence to show that DeLoach solicited Alex
the non-solicitation of customers, this court understands the
DeLoach court to have determined as a matter of law
that the Physiotherapy-DeLoach agreement did not prohibit Mr.
DeLoach from soliciting any Physiotherapy customer
because the agreement defined “customer” to be
Physiotherapy itself. So the court rejects
Physiotherapy's attempt to recast the DeLoach
ruling as being specific to any one customer. The
DeLoach court's ruling on the enforceability of
the agreement's non-solicitation of customers provision
satisfies the second and third elements of collateral
the non-solicitation of employees, while the opinion in
DeLoach discussed only Mr. DeLoach's alleged
solicitation of Mr. Wolf, it did so because Physiotherapy
apparently failed to produce any evidence that Mr. DeLoach
solicited or attempted to solicit anyone else. The court in
DeLoach did not enter judgment on
Physiotherapy's claim that Mr. DeLoach solicited Mr.
Wolf; it entered judgment “on Physiotherapy's
breach of contract claim to the extent the claim is
based upon his alleged solicitation of
Physiotherapy's employees.” DeLoach,
2018 WL 4409349, at *6 (emphasis added). So, the
DeLoach ruling satisfies the second and third
elements of collateral estoppel as to any claim
based on Mr. DeLoach's unlawful solicitation of
any Physiotherapy employees.
the court must determine whether the instant suit constitutes
an action between “the same parties” as
contemplated in the fourth element of Alabama's doctrine
of collateral estoppel. The Alabama Supreme Court has
indicated that the “same parties” requirement can
be met even without identical parties if the party
at issue is “in privity with a party to the prior
action.” Dairyland, 566 So.2d at 726. Privity
is a flexible term that generally applies when a non-party
“has his interests adequately represented by someone
with the same interests who is a party, ” such that the
parties have an “identity of interest.” Jim
Parker Bldg. Co. v. G & S Glass & Supply Co., 69
So.3d 124, 132 (Ala. 2011) (quoting EEOC v. Pemco
Aeroplex, Inc., 383 F.3d 1280, 1286 (11th Cir. 2004));
Dairyland Ins. Co., 566 So.2d at 726. Alabama law
has not defined the precise contours of privity, so
“the existence of privity has generally been resolved
‘on an ad hoc basis in which the circumstances
determine whether a person should be bound by or entitled to
the benefits of a judgment.'” Leon C. Baker,
P.C. v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 821 So.2d 158, 165 (Ala. 2001) (quoting Hughes
v. Martin, 533 So.2d 188, 191 (Ala. 1988)). In other
words, the party seeking estoppel must be “one who
would have been prejudiced by a contrary decision in the
prior case.” Dairyland Ins. Co., 566 So.2d at
argues that it had an identity of interest with Mr. DeLoach
in the DeLoach case because “Physiotherapy
seeks to hold ATI liable for alleged violations of Mr.
DeLoach's contractual duties” and that “each
and every one of Plaintiff's claims against ATI is based
on conduct of DeLoach.” (Doc. 39 at 7). So, according
to ATI, a ruling against Mr. DeLoach in that first lawsuit
would have prejudiced ATI in the instant action.
court agrees, but only insofar as Physiotherapy's
complaint actually attempts to base its claims on Mr.
DeLoach's contractual obligations. As noted
above, Physiotherapy's instant complaint makes at least
four references to Mr. DeLoach's contractual duties to
Physiotherapy and ATI's role in Mr. DeLoach breaching
those duties. (Doc. 29 at ¶¶ 59, 64-65, 69).
Proving that ATI played a role in Mr. DeLoach breaching a
contractual duty necessarily requires proving that Mr.
DeLoach did in fact breach one. That is, if the ruling in
DeLoach had determined that Mr. DeLoach had
breached his employment agreement with Physiotherapy, that
determination would clearly prejudice ATI in the instant
action by vitiating one potential defense to
Physiotherapy's allegations. Put another way, when Mr.
DeLoach defended the contract claims against him in
Deloach, he was adequately representing ATI's
interests regarding any potential liability for its
involvement in the alleged contractual violations, such that
ATI and Mr. DeLoach were in privity because they had an
identity of interest. See Jim Parker Bldg. Co., 69
So.3d at 132 (Ala. 2011); Dairyland Ins. Co., 566
So.2d at 726. So, the court concludes that ATI and Mr.
DeLoach meet the “same parties” requirement for
the purposes of collaterally estopping Physiotherapy from
re-litigating issues related to Mr. DeLoach's contractual
obligations and compliance.
this case satisfies all four elements of Alabama's
doctrine of collateral estoppel. Therefore, Physiotherapy is
precluded from relitigating legal and factual issues common
to its claims regarding Mr. DeLoach's alleged breach of
contract in supposed solicitation of Physiotherapy's
employees or customers in violation of Mr. DeLoach's
non-solicitation agreement with Physiotherapy that the court
decided in DeLoach. See Lee L. Saad Const. Co.
v. DPF Architects, P.C., 851 So.2d 507, 519 (Ala. 2002)
(stating that collateral estoppel prevents parties from
relitigating factual issues common to its claims that have
already been determined).
Aiding and Abetting Breach of Fiduciary Duty ...