Court Opinion

ID: 4356194
Source: CourtListenerOpinion
Date Created: 2019-01-04 18:01:15.956476+00
Date Added: 2024-06-11T09:36:51.366589
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                 ___________

                                      No. 18-1949
                                      ___________

                        LYNNANN VOORHEES, an individual,
                                                    Appellant

                                             v.

                  INDU TOLIA, an individual; VIRTUALITY LLC,
                 A New Jersey Corporation; CARE LLC, A New Jersey
                    Corporation; ADAM NEWMAN, an individual;
                     AUGTHAT LLC, a New Jersey Corporation
                     ____________________________________

                     On Appeal from the United States District Court
                               for the District of New Jersey
                         (D.C. Civil Action No. 3-16-cv-08208)
                      District Judge: Honorable Brian R. Martinotti
                      ____________________________________

                    Submitted Pursuant to Third Circuit LAR 34.1(a)
                                  November 6, 2018
            Before: CHAGARES, BIBAS and GREENBERG, Circuit Judges

                             (Opinion filed January 4, 2019)
                                     ___________

                                       OPINION*
                                      ___________

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
PER CURIAM

       Lynnann Voorhees appeals from the order of the District Court dismissing her

complaint. We will vacate and remand for further proceedings.

                                             I.

       We briefly summarize only enough of the background to explain our decision.

Voorhees alleges that she invented software services called “Augmented Reality for

Education,” including an augmented reality worksheet paired with a software application,

or “app.” She filed this civil action pro se alleging that defendants misappropriated those

alleged trade secrets under New Jersey state law. She asserted numerous other state-law

claims as well.

       Voorhees alleged that, with an eye toward future business ventures, she shared her

trade secrets with Indu Tolia pursuant to a nondisclosure agreement and that she shared

them with Adam Newman as well. She further alleges that she, Tolia and Newman then

formed a company called Virtuality LLC to market her services. According to Voorhees,

however, Tolia and Newman later forced her out of ownership by defrauding her into

signing a Stock Surrender Agreement and becoming an employee of Virtuality instead.

Tolia and Newman then parted ways and formed companies of their own—CARE LLC

(Tolia) and Augthat LLC (Newman). Voorhees claims that Tolia and Newman and their

companies are illegally profiting from her trade secrets. She also claims that Tolia has

breached the terms of her nondisclosure agreement. On the basis of these and other

allegations, Voorhees filed suit against Tolia, Newman, and the entities Virtuality, CARE

and Augthat.

                                             2
          Newman and Augthat never responded to Voorhees’s complaint, so she obtained a

default against them and filed a motion for the entry of default judgment. Tolia and

CARE did respond to Voorhees’s complaint by filing a motion to dismiss it under Fed. R.

Civ. P. 12(b)(6). Virtuality conditionally joined in that motion as well.1 Tolia and CARE

attached various documents to their motion, including copies of the Stock Surrender

Agreement referenced above and an Employment Agreement between Voorhees and

Virtuality. Tolia and CARE argued in passing that provisions of those agreements

waived or required Voorhees to arbitrate her claims, but they did not seek an order

compelling arbitration and instead argued that Voorhees failed to state claims on the

merits.

          The District Court granted Tolia’s and CARE’s motion and dismissed Voorhees’s

complaint with prejudice. It did so on the sole grounds that (1) a provision of the Stock

Surrender Agreement waived Voorhees’s right to file suit, and (2) a provision of the

Employment Agreement required her to arbitrate all of her claims. In light of its ruling,

the District Court also denied as moot Voorhees’s motion for a default judgment against

Newman and Augthat. Voorhees appeals.2

1
 The same counsel represents Tolia, CARE and Virtuality. Counsel contested the
propriety of service on Virtuality and stated that Virtuality was joining in the motion to
dismiss only to the extent that the District Court might deem service proper. We need not
address that issue.
2
 The District Court deemed Voorhees’s notice of appeal filed on the thirtieth day
following its order, so this appeal is timely and we have jurisdiction under 28 U.S.C. §
1291. We review the District Court’s dismissal under the Rule 12(b)(6) standard. See
CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165, 168 n.2 (3d Cir. 2014). In doing so,
we may consider the Stock Surrender Agreement and Employment Agreement because
                                             3
                                               II.

       Voorhees argues that the District Court erred in dismissing her complaint in its

entirety on the basis the two contractual provisions referenced above. We agree.

       First, the District Court relied on a provision of the Stock Surrender Agreement

titled “Actions and Proceedings.” (ECF No. 17-2 at 7-8, ¶ 14.) The District Court

concluded that this provision contains a clause “waiving the parties’ right to file a

lawsuit” and that it “precludes Plaintiff from asserting her claims in this Court.” That is

not the case. The District Court relied on language of the provision stating that “each of

the parties hereto hereby agrees to waive its respective rights to a jury trial of any claim

or cause of action based upon or arising out of this agreement or the transactions

contemplated hereby.” (Id. at 7) (emphasis added). By its terms, this provision purports

to waive only the parties’ rights to a jury trial. It does not waive the parties’ rights to a

bench trial or otherwise preclude them from asserting claims in court. To the contrary,

this provision includes a forum-selection clause permitting them to do so in New Jersey

state or federal court, just as Voorhees has done here. (Id.)3

they are integral to and relied on in the complaint. See id. at 168 n.2.
3
 The District Court’s discussion of this provision suggests that the court may have
viewed it as an arbitration clause. But neither this provision of the agreement nor any
other mentions arbitration, and a provision that merely waives the right to a jury trial is
not an arbitration clause. See In re County of Orange, 784 F.3d 520, 529 n.4 (9th Cir.
2015) (noting that the Federal Arbitration Act “permits pre-dispute jury trial waivers” but
“is not applicable here because it addresses such waivers only in the context of arbitration
clauses, and the contract at issue contains no such clause”); Tracinda Corp. v.
DaimlerChrysler AG, 502 F.3d 212, 223 (3d Cir. 2007) (noting that “the submission of a
case to arbitration involves a greater compromise of procedural protections than does the
waiver of the right to trial by jury”) (quotation marks omitted). We express no opinion
                                               4
       Second, the District Court relied on an arbitration clause contained in the

Employment Agreement. Parties can be compelled to arbitrate claims only if they have

contractually agreed to arbitration and only if the claims at issue are within the scope of

that agreement. See CardioNet, 751 F.3d at 172. In this case, the arbitration clause

requires arbitration of “[a]ny dispute arising under or related to [Voorhees’s] employment

with [Virtuality].” (ECF No. 17-3 at 6 ¶ 16.) To determine whether this clause requires

arbitration of Voorhees’s claims, the District Court should have looked to the “factual

underpinnings” of each one of those claims to determine whether it fell within the scope

of this clause. CardioNet, 751 F.3d 173.

       The District Court, however, did not address whether or why any of Voorhees’s

claims are subject to this clause. It is not immediately apparent to us that all of them are.

Voorhees, for example, alleges that Tolia breached a nondisclosure agreement that she

signed before Virtuality was even formed. Voorhees also alleges that Tolia and Newman

and their companies engaged in misconduct after her employment with Virtuality ended

and are continuing to do so. It does not appear that these allegations necessarily concern

a “dispute arising under or related to” Voorhees’s employment with Virtuality.

       Thus, we will vacate the District Court’s dismissal of Voorhees’s complaint and

remand for further proceedings. If the District Court again reaches the issue of

arbitrability on remand, it should apply the framework we set forth in CardioNet. In light

of our ruling, we will vacate the District Court’s denial of Voorhees’s motion for a

on the validity of the jury-trial waiver in this case.

                                               5
default judgment against Newman and Augthat as well.

       We raise sua sponte one final issue that should be a threshold consideration on

remand. Voorhees attempted to invoke the District Court’s diversity jurisdiction under

28 U.S.C. § 1332. In that regard, she alleged that she “resides” in Pennsylvania and that

Tolia and Newman “reside” in New Jersey. (ECF No. 1 at 3 ¶¶ 5, 7-8.) She also alleged

that the entity defendants are organized in and have their principal places of business in

New Jersey as well. (Id. ¶ 6.)

       These allegations are insufficient. To be diverse, the parties must be “citizens” of

different states. 28 U.S.C. § 1332. Allegations of an individual’s residence are

insufficient to allege that individual’s citizenship. See GBForefront, L.P. v. Forefront

Mgmt. Grp., LLC, 888 F.3d 29, 35 (3d Cir. 2018). As for the entity defendants, they are

limited liability companies and are deemed citizens of every state of which one of their

members is a citizen. See id. at 34. Voorhees did not allege these entities’ membership

or the citizenship of their members. Thus, Voorhees’s allegations are not sufficient to

invoke the District Court’s diversity jurisdiction. Jurisdictional allegations, however, can

be amended. 28 U.S.C. § 1653. The District Court should provide Voorhees with an

opportunity to amend her jurisdictional allegations if and when appropriate on remand.

                                            III.

       For these reasons, we will vacate the judgment of the District Court and remand

for further proceedings.

                                             6