Paramount Rx, Inc. v. Duggan

Paramount Rx, Inc. v. Duggan, 2015 NCBC 30.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF WAKE 14 CVS 13216

PARAMOUNT RX, INC., )
)
Plaintiff, )
)
v. )
) ORDER
ROBERT E. DUGGAN and )
AGELITY, INC., )
)
Defendants. )
)

{1} THIS MATTER is before the Court on Plaintiff’s Motion for Limited
Expedited Discovery (“Plaintiff’s Motion”) and Defendants’ Motion to Dismiss, or in
the Alternative, to Stay (“Defendants’ Motion”). For the reasons expressed below,
Plaintiff’s Motion is DENIED, Defendants’ Motion is GRANTED IN PART and
DEFERRED IN PART, as a result of which this action is STAYED.

Womble Carlyle Sandridge & Rice, LLP by Christopher W. Jones and Marina
C. Carreker for Plaintiff Paramount Rx, Inc.

Ellis & Winters LLP by Leslie C. Packer and James M. Weiss for Defendants
Robert E. Duggan and Agelity, Inc.

Gale, Chief Judge.

I. THE PARTIES

{2} Plaintiff Paramount Rx, Inc. (“Plaintiff” or “Paramount”) is a Delaware
pharmacy benefits management corporation with its principal place of business in
Cary, North Carolina. (Am. Compl. ¶ 5.) Nonparty Philip Escaldi (“Escaldi”) is
Paramount’s President. (Am. Compl. ¶ 6.) Nonparty Michael Sallusto (“Sallusto”)
is Paramount’s Executive Vice President. (Am. Compl. ¶ 28.)
{3} Defendant Agelity, Inc. (“Agelity”) is a Delaware pharmacy benefits
corporation that competes with Paramount and has its principal place of business in
Melville, New York. (Am. Compl. ¶ 7.) Escaldi and Sallusto were formerly
associated with Agelity.
{4} Defendant Robert E. Duggan (“Duggan”) is Agelity’s President and
resides in New York. (Am. Compl. ¶ 9.)

II. PROCEDURAL HISTORY

{5} Paramount initiated this action by filing its Complaint on October 1,
2014, accompanied by a Motion for Preliminary Injunction and Temporary
Restraining Order and a Notice of Designation, pursuant to which the case was
designated as a complex business case. The case was assigned to the undersigned
on October 2, 2014.
{6} Plaintiff seeks monetary and injunctive relief. The gravamen of
Plaintiff’s Complaint is that Agelity and Duggan, in his capacity as Agelity’s
President, have made and may continue to make defamatory statements to
customers in the marketplace within which Paramount and Agelity compete.
Paramount alleges that it was unaware of Defendants’ wrongful statements until it
learned of them during a May 2014 deposition of Charles Myrick (“Myrick”), the
President of American Consultants, Rx. (“American Consultants”), taken in New
York litigation. Myrick testified that the statements began as early as late 2009,
continued thereafter, and were factors that prevented American Consultants from
entering into a business relationship with Paramount. (Am. Compl. ¶¶ 37–41.)
{7} Prior to considering Plaintiff’s request for preliminary injunctive relief,
the Court raised an initial inquiry whether any injunctive relief would be barred by
the doctrine of prior restraint, grounded in the First Amendment of the United
States Constitution. The parties filed memoranda addressing this threshold issue
on October 21, 2014, discussing the principle that the prior restraint doctrine may
apply less stringently to commercial speech, provided that the party seeking an
injunction can demonstrate a pattern of defamatory commercial speech. After
reviewing the briefs and authorities cited, the Court elected not to deny any
possibility of a preliminary injunction, but expressed doubt that Plaintiff could
satisfy the necessary evidentiary requirement of a pattern.
{8} In response, Plaintiff filed a verified Amended Complaint on October
24, 2014, alleging additional statements beyond those made to Myrick, and followed
on October 30, 2014, with its Motion for Limited Expedited Discovery, seeking
limited discovery to further develop a record upon which to seek injunctive relief.
Later, on December 4, 2014, Plaintiff sought to expedite discovery regarding
Duggan’s challenge to personal jurisdiction.
{9} Defendants filed their Motion on November 26, 2014. In addition to
moving to dismiss all claims, Defendants alternatively urge the Court to stay this
proceeding pursuant to subsection 1-75.12(a) of the North Carolina General
Statutes in deference to two lawsuits that have been pending in New York (the
“New York Actions”).
{10} The Court held a status conference on December 5, 2014, in part to
further inquire into the nature and status of the New York Actions, after which the
Court accepted supplemental filings related to Defendants’ motion to stay. The
Court reserved any briefing or consideration of Defendants’ motion to dismiss.
{11} The Court heard argument regarding the motion to stay on January
15, 2015. At the hearing, the Court requested that Plaintiff further specify the
limited discovery topics it wished to pursue on an expedited basis, including topics
that would be addressed in a deposition of Defendant Duggan. Plaintiff complied by
submitting its January 20, 2015, letter.
{12} The Motions are then ripe and ready for ruling, except to the extent
that Defendants’ Motion seeks dismissal, as the Court has continued to defer any
briefing or consideration of that aspect of Defendants’ Motion.

III. THE PENDING ACTIONS

{13} Paramount’s primary complaint in this action is that Agelity and
Duggan have made and may continue to make false, misleading, and malicious
statements regarding Escaldi and Sallusto in order to cause companies to refrain
from doing business with Paramount. Paramount is the sole plaintiff in this action.
It seeks damages for past statements and an injunction against future statements.
In part, Paramount complains of statements made to Myrick for the purposes of
causing American Consultants to fail to do business with Paramount.
{14} There are two prior pending New York cases. The first of the New
York Actions was filed on November 30, 2011, and brought by Agelity and Duggan
against Escaldi, but not Paramount. Agelity, Inc. v. Escaldi, No.: 11-3654 (N.Y.
filed Nov. 30, 2011) (the “Escaldi Action”) (Defs.’ Mem. Supp. Mot. Stay or in
Alternative Dismiss (“Defs.’ Mem. Supp.”) Ex. A.) The Escaldi Action complaint is
grounded on a Settlement Agreement between Agelity and Escaldi entered after
Escaldi’s employment with Agelity ended, resolving claims and selling Escaldi’s
interest in Agelity. (Defs.’ Mem. Supp. Ex. A ¶¶ 12–24.) Agelity and Duggan seek
damage for Escaldi’s breach of the Settlement Agreement, and particularly its
nondisparagement clause (Defs.’ Mem. Supp. Ex. A ¶ 20) and the agreement not to
divulge confidential information. (Defs.’ Mem. Supp. Ex. A ¶ 22.) Escaldi
counterclaimed for breach of the nondisparagement provision of the Settlement
Agreement, complaining of Duggan’s defamatory statements to Myrick and
Paramount’s loss of American Consultants as a potential customer. (See Defs.’
Mem. Supp. Ex. B.) Although Paramount is not a party in the Escaldi Action,
Escaldi seeks to recover damages because Paramount lost American Consultants as
a customer. (Defs.’ Mem. Supp. Ex. B, Am. Countercl. ¶¶ 34–41.)
{15} Agelity filed its second New York action on April 30, 2012, styled
Agelity, Inc. v. Sallusto, No.: 12-13366 (N.Y. filed Apr. 30, 2012) (the “Sallusto
Action”).1 (Defs.’ Mem. Supp. Ex. C.) In that action, both Paramount and Escaldi
are defendants. Agelity complains that Paramount was formed through Escaldi’s
breaches of duties and through trade secret misappropriation, and that thereafter
Paramount unfairly competed and wrongfully solicited Agelity’s customers.
Defendants did not assert any counterclaims. (See Defs.’ Mem. Supp. Ex. D.)

1 The full list of defendants consists of Michael Sallusto, Philip Escaldi, Kenneth Hammond, Jeremy

Starrin, and Paramount Rx., Inc.
{16} Paramount concedes that the North Carolina action and the
counterclaim in the Escaldi Action involve allegations that Duggan made
statements to Myrick causing Paramount’s loss of American Consultants as a
customer. Paramount asserts, however, that the overlap between the actions does
not extend beyond this, and that the North Carolina action will further extend to
statements and factual matters not involved in the New York Actions. (Pl.’s Opp’n
Defs.’ Mot. Stay 5–6.)
{17} Defendants respond that the overlap between the cases is not so
narrow and that all statements made by the various parties in the competitive
marketplace as to the circumstances surrounding Paramount’s formation and
operation, and their truth or falsity, are at the core of the New York Actions.
Defendants assert that Paramount could have pursued and might still pursue its
claims in New York, and that Paramount’s insistence on a North Carolina forum is
compromised by the fact that Escaldi asserted a damages claim in New York arising
out of the same conduct Paramount complains of in the North Carolina action, and
for the loss of the same customer.
{18} Some of the additional statements Plaintiff contends are involved in
only the North Carolina action are those made to James D. Robbins (“Robbins”).
The North Carolina Amended Complaint alleges as to those statements: “Following
Escaldi and Sallusto’s departure from Agelity, Duggan told Robbins that Escaldi
and Sallusto were liars and thieves, that they had stolen proprietary information
from Agelity, and that during the time they were employed by Agelity, Escaldi and
Sallusto operated Paramount to compete with Agelity.” (Am. Compl. ¶ 31.)
Defendants respond that any statements to Robbins are necessarily relevant to the
New York Actions, whether or not they are specifically referred to in the pleadings,
because Agelity’s central claim is that Escaldi and Sallusto engaged in this
improper conduct when forming and operating Paramount. Agelity’s allegation in
the Sallusto Action is stated as: “The Individual Defendants wrongfully
misappropriated the Proprietary Information and converted it to their own use in
their competing venture, Paramount.” (Defs.’ Mem. Supp. Ex. C ¶ 86.)
IV. ANALYSIS

{19} “If, in any action pending in any court of this State, the judge shall find
that it would work substantial injustice for the action to be tried in a court of this
State, the judge on motion of any party may enter an order to stay further
proceedings in the action in this State.” N.C. Gen. Stat. § 1-75.12(a) (2014). The
Court should make its determination based on the exercise of its sound discretion.
Home Indem. Co. v. Hoechst Celanese Corp., 99 N.C. App. 322, 325, 393 S.E.2d 118,
120 (1990); La Mack v. Obeid, 2015 NCBC LEXIS 24, at *15 (N.C. Super. Ct. Mar.
5, 2015).
{20} The factors that may be considered in the exercise of that discretion
include:
(1) the nature of the case, (2) the convenience of the witnesses, (3) the
availability of compulsory process to produce witnesses, (4) the relative
ease of access to sources of proof, (5) the applicable law, (6) the burden
of litigating matters not of local concern, (7) the desirability of
litigating matters of local concern in local courts, (8) convenience and
access to another forum, (9) choice of forum by plaintiff, and (10) all
other practical considerations.

Lawyers Mut. Liab. Ins. Co. v. Nexsen Pruet Jacobs & Pollard, 112 N.C. App. 353,
356, 435 S.E.2d 571, 573 (1993).
{21} This Court may, but is not required to, look at each of the Lawyers
Mutual factors in weighing its decision, and has discretion whether to consider any
other pertinent factors as it seeks to implement the purposes of section 1-75.12. Id.
at 357, 435 S.E.2d at 573–74 (citing Motor Inn Mgmt., Inc. v. Irvin-Fuller Dev. Co.,
46 N.C. App. 707, 713, 266 S.E.2d 368, 371 (1980)). The ultimate question is
whether the particular factors of this particular case lead to the reasoned conclusion
that there exists a reasonable, convenient, and fair forum, resort to which would
avoid a substantial injustice that would otherwise occur. Wachovia Bank N.A. v.
Harbinger Capital Partners Master Fund I, Ltd., 201 N.C. App. 507, 520, 687
S.E.2d 487, 495 (2009).
{22} The Court addresses the Lawyers Mutual factors below in reverse
order, and makes only passing reference to some of the factors, as they are not
dispositive on the particular facts of this case.
{23} Regarding any concern for practical considerations, the Court has
considered factors such as relative access to and timing of discovery, as well as the
potential impact of Duggan’s challenge to personal jurisdiction in North Carolina.
Although the New York Actions have been pending for a significant amount of time,
discovery apparently has not substantially advanced. At the same time, Paramount
alleges that Myrick’s deposition in the New York Actions provided the factual
foundation for and was the genesis of the North Carolina action. Paramount argues
that it should be allowed to pursue the North Carolina action and target expedited
discovery to the narrow set of contentions necessary to try only those issues
presented in this action, and that it should not be required to depend on discovery
in the broader set of claims pending in New York. Defendants seek to minimize
Paramount’s timing argument, urging that discovery in New York is imminent.
Defendants also assert that discovery in the North Carolina action will not be
significantly narrower, because the cases share the common need to develop a
record regarding the overall nature of Escaldi and Sallusto’s departure from and
subsequent competition with Agelity, and that determination of the truth or falsity
of the statements of which Paramount complains must derive from that common set
of facts. The Court concludes that practical considerations can be argued in favor of
either party’s position as to a stay and do not dominate the factors that should
determine the Court’s exercise of its discretion.
{24} Regarding the weight to be given to Plaintiff’s choice of forum, the
Court acknowledges that this choice is usually entitled to great deference, and that
the movant who seeks to stay the action in the plaintiff’s chosen forum faces a
significant burden. See, e.g., Firstar Bank, N.A. v. Interlease 757 Aircraft
Investors, LLC, No. 1:01CV706, 2002 U.S. Dist. LEXIS 20974, at *10 (M.D.N.C.
Aug. 23, 2002); La Mack, 2015 NCBC LEXIS 24, at *16–17. However, that
consideration in this particular case is tempered by various facts, most importantly
that Escaldi placed the truth of Agelity and Duggan’s statements in issue, at least
as to Myrick, in his New York counterclaim, and has sought to recover damages for
Paramount’s loss of Myrick’s company as a customer. Considering this background,
the Court finds that it should not give substantial importance to either Paramount’s
choice of forum on the one hand or on the other hand any argument that Agelity
may make that the Court should defer to the New York Actions under the “first-
filed” rule. See, e.g., Nutrition & Fitness, Inc. v. Blue Stuff, Inc., 264 F. Supp. 2d
357, 360–62 (W.D.N.C. 2003) (discussing the parameters of the first-filed rule).
{25} The Court does not perceive any significant matters of local concern
favoring either the North Carolina or New York forum.
{26} The Court likewise does not consider the need to apply foreign law to
be a significant factor. While ultimately either the New York or North Carolina
courts must conduct a conflicts-of-law analysis to resolve pending claims, there is
neither an apparent manifest difference between the law of the respective states on
the underlying claims, nor an apparent potential for difficulty of either forum’s
application of foreign law.
{27} The Court perceives the relative ease of access to discovery and the
availability of compulsory process as neutral factors. Each side has made an
equally supported argument based on discovery considerations. The Court does not
believe that the relative speed at which discovery in the various actions has
proceeded or might proceed should be a controlling or dominant factor in the stay
analysis. Notably, neither Paramount nor Sallusto has challenged personal
jurisdiction in New York. While the Court does not at this time express any opinion
on the merits of the motion, Duggan has moved to dismiss the North Carolina
action for lack of personal jurisdiction.
{28} The Court likewise sees no significant issue regarding the comparative
convenience of the witnesses.
{29} The most critical determination is how the two actions compare. In
this regard, the Court concludes that the cases overlap more than Paramount’s
arguments indicate, and that the necessary factual records for the two cases are
more common that its opposition to a stay recognizes. Paramount places the
strongest emphasis on its point that its claims and the relief sought in the North
Carolina action are different from the New York Actions. At the same time,
Paramount does not fully account for the fact that the necessary proof for the relief
it seeks in North Carolina must extend into the areas at the heart of the New York
litigation. Ultimately, the various claims necessitate that a court resolve whether
Agelity or Duggan’s statements are true. Even though Paramount chose not to
make an affirmative damages counterclaim in the Sallusto Action, Paramount’s
interest is aligned with Escaldi’s and Paramount is motivated and positioned to
defend on the basis that statements made about it and its officers or employees are
false.
{30} In sum, considering the above factors separately and collectively, the
Court concludes that Defendants would suffer substantial injustice if required to
proceed with the separate actions in New York and the action in North Carolina,
and that New York provides an adequate forum to redress Paramount’s claims. The
Court should exercise its discretion under section 1-75.12 to stay the North Carolina
action.
{31} In contrast, the court concludes that Paramount will not suffer
substantial injustice if this action is stayed. The only argument of prejudice to
Paramount is that it may suffer irreparable harm if it is not allowed immediate
access to discovery in North Carolina when discovery in the New York Actions has
been delayed. Obviously, relevant discovery is available in New York, and,
significantly, Paramount expressly alleges that discovery in New York allowed it to
file this action in North Carolina. While discovery may have been slow to develop in
the New York Actions, the Court does not find this adequate to overcome the
substantial injustice of requiring Agelity and Duggan to proceed simultaneously on
different fronts. Further, as to any claim of prejudice Paramount might make, the
Court again notes that in order to address any preliminary injunctive relief, the
Court’s inquiry would have to extend to the question of the truth or falsity of the
alleged defamatory statements. That issue is at the heart of the discovery that will
proceed in the New York actions. Should a developed record suggest that injunctive
relief may be appropriate, for some reason other than that relief is not available
from the New York courts, this Court can reconsider its stay.

V. CONCLUSION

{32} Accordingly, for the reasons stated, and concluding that Defendants
will suffer substantial injustice if the present case is allowed to go forward where
there is an adequate forum as a result of prior pending litigation in New York, in
the exercise of the Court’s discretion, Defendants’ Motion to Dismiss, or in the
Alternative, to Stay is GRANTED, to the extent it seeks to stay this action.
Plaintiff’s Motion for Expedited Discovery is, therefore, DENIED. Further briefing
or consideration of Defendants’ Motion to Dismiss is DEFERRED.

IT IS SO ORDERED this 27th day of March, 2015.