U.S. District Court for the Eastern District of Pennsylvania

PHILADELPHIA – A lawsuit between two companies involving allegations of breach of a non-disclosure agreement, fraud misappropriation and copyright infringement will not be returning to the Montgomery County Court of Common Pleas.

Judge Michael M. Baylson ruled May 5 that further proceedings involving East Norriton-based TGaS Advisors in their litigation against Scottsdale, Ariz.-based Zensights would only be heard in federal court, specifically, the U.S. District Court for the Eastern District of Pennsylvania.

TGaS sought a declaratory judgment “concerning TGaS’s development of ‘vendor assessment technology called Vendor Ratings and Ranking Benchmark’ as it relates a mutual non-disclosure agreements (MNDA) between Zensights and TGaS” and “that TGaS’s development and sale of the TGaS product does not constitute a breach of the MNDA, fraud misappropriation, nor copyright infringement.”

Zensights removed the case to federal court, based on diversity of citizenship – a fact TGaS contested, because several members of its limited liability corporation are based in Arizona, which they argued nullified any diversity in the case.

Thus, TGaS sought the matter be remanded to state court – however, Zensights asserted theories of copyright infringement made the matter a federal one, and opposed any such remanding of the case.

“Because plaintiff sought a declaratory judgment in anticipation of a threatened claim of copyright infringement, the removal was proper on the basis of the complaint. The amended notice of removal, specifically claiming copyright infringement as a basis for federal question subject- matter jurisdiction, was proper,” Baylson said.

“After reviewing the many briefs, letters, and pleadings submitted by the parties, the Court determines that TGaS’s claim for declaratory relief regarding copyright infringement ‘arises under’ federal law under both 28 U.S.C. Sections 1331 and 1338(a),” Baylson added.

Baylson said the federal issue of copyright infringement is both “disputed and substantial”, and given TGaS’s “vociferous objections to the validity of the copyright claims” in a recent briefing, it was clear the issue of the copyright claim was disputed.

Baylson stated “the Court’s exercise of jurisdiction in this case is entirely consistent with the congressionally approved balance of federal and state judicial responsibilities.”

“Because the Court concludes that the nature of Zensights’ threatened action is one of federal law and that TGaS’s state-law claim necessarily raises a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities, the Court finds that it has subject-matter jurisdiction over the entire dispute based on 28 U.S.C. Sections 1331, 1338, and 1367,” Baylson said.

“TGaS has asserted that it was improper for Zensights to file an amended notice of removal. Although TGaS does not reassert this argument in the most recent round of briefing, the Court now clarifies that the Zensights’ amended notices are valid,” Baylson concluded.

The plaintiffs are represented by Michael D. LiPuma of LiPuma Law in Philadelphia, plus Matthew M. Oliver, Richard Scott Thompson and Wan Cha of Lowenstein Sandler in Roseland, N.J.

The defendants are represented by Luke P. McLoughlin and Anthony L. Gallia of Duane Morris, in Philadelphia.

U.S. District Court for the Eastern District of Pennsylvania case 2:16-cv-01872

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com

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