Rocketpower, Inc. v. Strio Consulting, Inc.

Background

RocketPower and Strio worked together to provide recruiting and related services to third-party businesses. According to RocketPower’s amended complaint, the companies jointly screened applicants, made job offers, and provided workers to clients. Strio drafted worker agreements that included non-competition provisions and a provision addressing choice of law, forum selection, and personal jurisdiction.

RocketPower alleged that Strio interfered with RocketPower’s relationships with clients by contacting those clients, making disparaging statements about RocketPower’s chief executive, and misrepresenting the workers’ employment status. RocketPower asserted claims involving a declaration about the worker agreements, intentional interference with contractual relations, negligent interference with prospective economic advantage, and unfair competition under California law. It also sought injunctive relief.

Strio had filed a separate case against RocketPower in the District of Minnesota. That case alleged that RocketPower failed to pay amounts allegedly owed under the companies’ agreement concerning costs, payroll, and profits. The two cases were consolidated for all purposes, including discovery, motions, hearings, and trial.

Strio’s Motion to Dismiss

Strio moved to dismiss RocketPower’s complaint under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a legally sufficient claim. Strio raised two principal arguments. First, it asserted that the federal court in California had already determined that RocketPower’s claims could not proceed under California law, and that the “law-of-the-case” doctrine required this court to follow that supposed determination. Second, Strio argued that RocketPower’s claims had to be asserted as compulsory counterclaims in Strio’s separate case rather than in a separate complaint.

The court first observed that Strio’s Rule 12(b)(6) motion was a successive Rule 12 motion. Strio had earlier filed a motion under Rule 12(b)(2) challenging personal jurisdiction in the California federal court, and the court found that the failure-to-state-a-claim arguments had been available then. Ordinarily, Rule 12(g)(2) bars a party from making a later Rule 12 motion based on an objection that was available but omitted from an earlier motion. The court nevertheless considered Strio’s arguments because denying the motion on that procedural ground would likely only lead to a later motion for judgment on the pleadings and would not serve the goal of resolving the case efficiently.

Earlier Transfer Order and Choice of Law

The court rejected Strio’s argument that the earlier transfer order had resolved the California-law issue. Judge William H. Alsup’s order had held that the forum-selection clause in the worker agreements was enforceable and required the case to be transferred to Minnesota. It did not expressly decide that Minnesota law, rather than California law, governed RocketPower’s claims.

The court also found that the earlier order did not implicitly resolve the choice-of-law question. The worker agreements contained both a Minnesota choice-of-law clause and another provision stating that the agreements would be governed by the law of the state where services were primarily performed. The court noted that the parties appeared to agree that the services at issue were performed in California, creating an apparent conflict that the transfer order did not address. Because the earlier order did not settle that issue, the law-of-the-case doctrine did not bar the court from considering it.

Compulsory-Counterclaim Argument

Under Federal Rule of Civil Procedure 13(a), a compulsory counterclaim is a claim that must be brought in response to an opposing party’s claim because it arises from the same transaction or occurrence and meets the rule’s other requirements. The court explained that the central test asks whether the claims are logically related and could efficiently be tried together.

The court ruled that RocketPower’s claims were not compulsory counterclaims to Strio’s claims. Strio’s separate case focused on the agreement between RocketPower and Strio concerning shared costs, payroll expenses, and profits. RocketPower’s claims in this case instead focused on the worker agreements, the validity of their restrictive provisions, and Strio’s alleged interference with RocketPower’s relationships with clients.

The court acknowledged that the two sets of claims had a common background: the companies had decided to work together. But it held that sharing a general, “but-for” cause was not enough to make the claims arise from the same transaction or occurrence under Rule 13(a). The court also stated that, even if RocketPower’s claims had been compulsory counterclaims, consolidation of the cases would make dismissal inappropriate under the circumstances presented.

Disposition

The court denied Strio Consulting, Inc.’s Motion to Dismiss. The order did not decide the ultimate merits of RocketPower’s claims or Strio’s claims.