# Permobil, Inc. v. Westphal

> District Court, M.D. Tennessee · March 7, 2024

URL: https://www.frixlaw.com/law-library/cases/10439175

## Case

- **Court:** District Court, M.D. Tennessee
- **Decided:** March 7, 2024
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

IN THE UNITED STATES DISTRICT COURT FOR THE
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION

PERMOBIL, INC., )
)
Plaintiff, ) NO. 3:23-cv-00586
)
v. ) JUDGE CAMPBELL
) MAGISTRATE JUDGE HOLMES
MARK WESTPHAL, )
)
Defendant. )

MEMORANDUM
Pending before the Court is Defendant Mark Westphal’s Motion to Dismiss or in the
Alternative to Transfer and Motion for Fees and Statutory Penalties. (Doc. No. 12). Plaintiff filed
a response in opposition (Doc. No. 18), and Defendant filed a reply (Doc. No. 36).
On February 14, 2024, Defendant filed a Notice of Supplemental Authority informing the
Court that he had filed an Unfair Labor Practice Charge with the National Labor Relations Board
(“NLRB”) and that the NLRB may issue a Complaint against Permobil concerning the non-
competition, non-solicitation, and confidential information provisions at issue in this case. (Doc.
No. 57). On March 1, 2024, Defendant notified the Court that the NLRB filed a Complaint against
Permobil. Defendant moved to stay this case pending the outcome of the NLRB Complaint. (Doc.
No. 61). Also before the Court is Plaintiff’s Motion for Preliminary Injunction (Doc. No. 19),
Defendant’s response (Doc. No. 37), and Plaintiff’s reply (Doc. No. 38).
For the reasons stated herein, the motion to dismiss (Doc. No. 12) will be DENIED. The
Court will address the motion for preliminary injunction and motion for stay by separate order.
I. FACTUAL BACKGROUND
Plaintiff Permobil, Inc., is a Tennessee corporation that develops, manufactures, and
markets wheelchairs, seating and positioning devices, and wheelchair accessories. (Complaint,
Doc. No. 1, ¶ 1). Defendant Mark Westphal is a former employee of Permobil who is now
employed by Sunrise Medical, LLC, a direct competitor of Permobil. (Id., ¶¶ 2, 8).

On or about October 14, 2021, Westphal executed an Employment Agreement with
Permobil. (Id., ¶ 32). The Employment Agreement contains certain restrictive covenants that, by
their terms, prohibit Westphal from engaging in certain conduct, including competition,
solicitation, disclosure of trade secrets, and disparagement – within a year of the termination of his
employment with Permobil. (Id., ¶ 35; see also, Employment Agreement, Doc. No. 1-1). The
Employment Agreement contains a provision on “Jurisdiction; Venue; [and] Governing Law,”
which provides that the Employment Agreement shall be governed by Tennessee law and that the
parties agree to submit to the “exclusive jurisdiction” of “any federal court sitting in the Middle
District of Tennessee or any state court in Wilson County, Tennessee.” (Doc. No. 1-1, ¶ 6.E.).

Also included in the Employment Agreement is a section printed in bold and all-caps that
states:
THE EMPLOYEE HEREBY ACKNOWLEDGES AND REPRESENTS
THAT THE EMPLOYEE HAS HAD THE OPPORTUNITY TO
CONSULT WITH INDEPENDENT LEGAL COUNSEL REGARDING
THIS AGREEMENT, AND THE EMPLOYEE FULLY
UNDERSTANDS THE TERMS AND CONDITIONS CONTAINED
HEREIN.
(Id., ¶ 6.C.).
On that same date, Defendant also executed a separate Confidentiality and Non-Disclosure
Agreement related to “Project Greenfield” (the “NDA”). (Compl, Doc. No. 1, ¶ 41; see also, NDA,
Doc. No. 1-2). The NDA specifies that Tennessee law applies to the agreement. (Doc. No. 1-2,
¶ 8).
On April 14, 2023, Westphal notified Permobil of his intent to end his employment with
Permobil. (Doc. No. 1, ¶ 64). His last day with Permobil was April 28, 2023. (Id.). Less than a
week later, Permobil became aware that Westphal had begun working for Permobil competitor

Sunrise Medical. (Id., ¶¶ 68, 69).
II. PROCEDURAL BACKGROUND
On June 9, 2023, Permobil initiated this lawsuit against Mark Westphal, bringing claims
on several theories of liability: (1) breach of contract, specifically the confidentiality, non-compete,
and non-solicitation provisions of his October 14, 2021 Employment Agreement; (2) breach of
contract, specifically the October 14, 2021 Confidentiality and Non-Disclosure Agreement; (3)
violation of the Tennessee Uniform Trade Secrets Act; (4) Violation of the Federal Defend Trade
Secrets Act. (See Complaint, Doc. No. 1). Defendant seeks dismissal of this case under Federal
Rules of Civil Procedure 12(b)(3) and 12(b)(6) for improper venue and failure to state a claim.

(Doc. No. 13).
Approximately six weeks later, on July 21, 2023, Permobil moved to preliminarily enjoin
Westphal from: (1) working for Sunrise Medical, LLC or any other Permobil competitor for a
period of one year (with such period extended during the period of the alleged violation of the
Employment Agreement); (2) using or disclosing confidential information and confidential trade
secrets; and (3) soliciting or helping others to solicit Permobil’s customers. (Doc. No. 19).
On August 31, 2023, Westphal filed charges with the National Labor Relations Board,
claiming that Permobil violated his rights under the National Labor Relations Act by subjecting
him to a restrictive covenant and taking steps to enforce that covenant. (Doc. No. 61-1). On
March 1, 2024, the NLRB filed a Complaint against Permobil charging that the restrictive
covenants in the Employment Agreement and maintenance of this lawsuit interfere with rights
guaranteed in Section 7 of the National Labor Relations Act. (Doc. No. 61-3). The NLRB
Complaint requires Permobil to file an answer by March 15, 2024, and sets a hearing for December
17, 2024. (Id.).

III. ANALYSIS
Defendant moves to dismiss the case under Federal Rule of Civil Procedure 12(b)(3) for
improper venue. The vast majority of Defendant’s argument rests on the proposition that the
Washington Non-Compete Act (“WNA”), Wash. Rev. Code § 49.62.005 et al., renders void the
forum selection clause, and the non-compete provisions in the Employment Agreement. In effect,
Defendant seeks dismissal of the case as a whole based on improper venue and all four claims
based on his challenge to one part of one claim – all based on a Washington statute.
A. Venue
Plaintiff alleges venue is proper here for two reasons: (1) the forum selection clause in the

Employment Agreement; and (2) under 28 U.S.C. § 1391 because a substantial part of the events
giving rise to the claims occurred in this district. (Compl., Doc. No. 1, ¶ 4). Defendant argues at
length against the forum selection clause as a basis for venue, relying on the WNA provision that
addresses such clauses in non-compete agreements. Defendant specifically argues that the WNA
“prohibits an employer from subjecting a Washington-based employee to an out-of-state forum
selection clause.” (Doc. No. 13 at 2 (citing Wash. Rev. Code § 49.62.050)).1 Because the

1 Wash. Rev. Code § 49.61.050 provides: “A provision in a noncompetition covenant signed by an
employee or independent contractor who is Washington-based is void and unenforceable: (1) If the
covenant requires the employee or independent contractor to adjudicate a noncompetition covenant outside
of this state; and (2) To the extent it deprives the employee or independent contractor of the protections or
benefits of this chapter.
Employment Agreement includes a non-compete provision that Defendant contends violates the
WNA, Defendant argues venue is improper.
In effect, Defendant asks the Court to apply Washington law because he is a resident of
that state, without regard to important steps the Court is required to take in the choice-of-law
analysis. Further Defendant’s argument confuses two issues: proper venue and choice of law. Of

course, in certain circumstances, this Court (the venue) often applies the law of states other than
Tennessee, even while applying Tennessee choice-of-law rules.
“Ultimately, [Defendant’s] argument puts the cart before the horse.” Wirtgen America,
Inc. v. Hayden-Murphy Equip. Co., No. 3:22-cv-00308, 2023 WL 123499, at *8 (M.D. Tenn. Jan.
6, 2023). Defendant argues that venue is improper because Washington law – specifically the
WNA – prohibits an employer from subjecting a Washington-based employee to an out-of-state
forum selection clause. But “no state has the unilateral power to legislatively nullify the choice-
of-law principles of other states.” Id. “To the contrary, ‘[t]he only way that the [laws] of any
particular state can make a choice of law clause void is if that particular state’s law applies to the

matter before the Court’ in the first place.” Id. (quoting Momentum Mktg. Sales & Servs., Inc. v.
Curves Int’l, Inc., No. W-07-CA-48, 2008 WL 11334569, at *2 (W.D. Tex. Dec. 17, 2008)).
Tennessee follows the Second Restatement of Conflict of Laws. Williams v. Smith, 465
S.W.3d 150, 153 (Tenn. Ct. App. 2014). Under those rules, a choice of law provision in a contract
will be honored provided it was: (1) executed in good faith; (2) the chosen jurisdiction bears a
material connection to the transaction; (3) the basis for the jurisdiction is reasonable and not a
sham; (4) the choice of the jurisdiction is not contrary to the fundamental policy of a state having
a materially greater interest and whose law would otherwise govern. Id. (citing Restatement
(Second) of Conflict of Laws, § 187(2) (1971)).
The Court finds that, on the record before it, the Employment Agreement was executed in
good faith as Defendant had one week to review the agreement and consult with an attorney. (See
Doc. No. 1-1, ¶ 6.C.). While Defendant argues he was told that Washington law would govern,
he offers no explanation as to why he signed a contract that selected Tennessee law. Defendant
presents no argument addressing the second two choice-of-law factors – material connection and

reasonableness – and the Court finds those factors support the application of Tennessee law.
Finally, the Court must weigh the interests of the two states at issue – Tennessee and Washington
– to determine if one state’s interests are “materially greater” than the other. Defendant argues
that Washington’s WNA shows its interest in protecting its residents against certain types of
restrictive covenants, while Plaintiff argues that Tennessee has an interest in protecting its
businesses from unfair competition and trade secret theft. It is important to note at this juncture
that the WNA does not, by its own terms, address non-solicitation agreements, confidentiality
agreements, or trade secret restrictive covenants. Wash. Rev. Code §§ 49.62.010(4) and
49.62.020.2

Plaintiff’s claims in this case cover actions well beyond the non-compete provisions in the
Employment Agreement – claims that are therefore outside the scope of the WNA. Given that
Defendant’s “materially greater” argument rests on Washington law concerning one of Plaintiff’s
four claims, and those other claims are not the subject of any Washington statutory provision
brought to the Court’s attention, the Court is not persuaded that Washington interests substantially
outweigh Tennessee interests as to all claims at issue. In effect, Defendant suggests that because

2 The Washington Non-Compete Act provides that “a ‘noncompetition covenant’ does not include:
(a) A nonsolicitation agreement; (b) a confidentiality agreement; (c) a covenant prohibiting use or
disclosure of trade secrets or inventions; (d) a covenant entered into by a person purchasing or selling the
goodwill of a business or otherwise acquiring or disposing of an ownership interest; or (e) a covenant
entered into by a franchisee when the franchise sale complies with RCW 19.100.020(1).” Wash. Rev. Code
§ 49.62.010(4).
Washington enacted legislation about one topic, that Act mandates the venue on all claims
asserted, regardless of the fact that Washington law does not speak to the other causes of action.
In sum, the parties agreed to the application of Tennessee law in the Employment
Agreement and the non-disclosure agreement, and the choice of law factors do not result in
ignoring those agreements, including the forum selection clause. Having found that Tennessee

law governs, Defendant’s venue challenge, which is based almost exclusively on application of
Washington law, is unavailing. Venue in this forum is proper pursuant to the forum selection
clause.
Moreover, aside from the forum selection clause, based on the allegations in the Complaint,
the Court finds that venue is proper here because “a substantial part of the events or omissions
giving rise to the claim occurred” in Tennessee. 28 U.S.C. § 1391(b)(2).3
B. Failure to State a Claim
Federal Rule of Civil Procedure 12(b)(6) permits dismissal of a complaint for failure to
state a claim upon which relief can be granted. For purposes of a motion to dismiss, a court must

take all of the factual allegations in the complaint as true. Ashcroft v. Iqbal, 556 U.S. 662 (2009).
To survive a motion to dismiss, a complaint must contain sufficient factual allegations, accepted
as true, to state a claim for relief that is plausible on its face. Id. at 678. A claim has facial
plausibility when the plaintiff pleads facts that allow the court to draw the reasonable inference

3 Defendant also raises forum non conveniens as grounds for dismissal. This argument appears to
rely heavily on the arguments the Court has addressed and rejected concerning the application of
Washington law. (Doc. No. 13 at 18 (“Since the forum selection clause is unenforceable, typical
considerations of improper venue and forum non conveniens apply to this motion.”). To the extent
Defendant asserts a forum non convenience argument independent those concerning application of
Washington law, the Court finds forum non conveniens does not merit dismissal. In reaching this
conclusion, the Court notes that the parties selected Tennessee as the forum. Although litigating in
Tennessee presents certain logistical hurdles for the Defendant, it is not unnecessarily burdensome,
particularly because the realities of modern litigation do not require the Defendant’s physical presence in
the forum on a regular basis.
that the defendant is liable for the misconduct alleged. Id. In reviewing a motion to dismiss, the
Court construes the complaint in the light most favorable to the plaintiff, accepts its allegations as
true, and draws all reasonable inferences in favor of the plaintiff. Directv, Inc. v. Treesh, 487 F.3d
471, 476 (6th Cir. 2007). Thus, dismissal is appropriate only if “it appears beyond doubt that the
plaintiff can prove no set of facts in support of his claim which would entitle him to relief.”

Guzman v. U.S. Dep’t of Children’s Servs., 679 F.3d 425, 429 (6th Cir. 2012). In considering a
Rule 12(b)(6) motion, the Court may consider the complaint and any exhibits attached thereto,
public records, items appearing in the record of the case, and exhibits attached to Defendant’s
motion to dismiss provided they are referred to in the Complaint and are central to the claims.
Bassett v. National Collegiate Athletic Assn., 528 F.3d 426, 430 (6th Cir. 2008).
Defendant argues that Plaintiff fails to state a claim, presenting several arguments. First,
Defendant argues that the claim for breaching the non-compete provision of the employment
agreement (i.e., part of the basis for Count I), fails under Washington law. As stated, the Court is
applying Tennessee law and finds that Count I states a claims upon which relief can be granted.

Defendant next argues that Plaintiff’s other claims fail because they are pleaded “upon
information and belief” and Plaintiff fails to plead sufficient facts to support those claims. (Doc.
No. 13 at 24). As Plaintiff correctly notes in its response, while the Iqbol/Twombly standard
requires some factual allegations to state a claim, a plaintiff is not required to “include detailed
factual” allegations or “supporting evidence.” Acosta v. Min & Kim, Inc., 919 F.3d 361, 367 (6th
Cir. 2019). Reading the Complaint as a whole, accepting the allegations as true, and drawing all
inferences in Plaintiff’s favor, the Court concludes that Plaintiff has pleaded claims under Counts
II, III, and IV.
IV. CONCLUSION
For the reasons stated, Defendant’s Motion to Dismiss (Doc. No. 12) will be DENIED.
An appropriate order will enter.

WILLIAM L. CAMPBELL, Gh
UNITED STATES DISTRICT JUDGE

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10439175. Public record. Not legal advice.