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Sleepbit, LLC v. Push Software Interactions, Inc.

United States District Court, N.D. Oklahoma

June 20, 2019




         Now before the Court are the following motions: Defendant Push Software Interactions, Inc.'s Motion to Dismiss for Lack of Personal Jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2) (Dkt. # 12); Defendant Andre Doucette's Motion to Dismiss for Lack of Personal Jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2) (Dkt. # 14); Defendant Chad Jones' Motion to Dismiss for Lack of Personal Jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2) (Dkt. # 16); and Sleepbit, LLC's Motion to Transfer Venue and Brief in Support (Dkt. # 22). Each of the defendants argues that it/he is not subject to personal jurisdiction in Oklahoma and each asks the Court to dismiss plaintiff's claims against it/him for lack of personal jurisdiction. Plaintiff responds that each of the defendants knowingly entered a business relationship with an Oklahoma business, and the Court can exercise personal jurisdiction over defendants. Plaintiff also argues that its claims fall within a mandatory forum selection clause in a confidentiality agreement, and it asks the Court to transfer this case to the United States District Court for the Eastern District of Oklahoma.


         Sleepbit, LLC (Sleepbit) is in the business of designing tools and products “pertaining to individuals' sleep related health and airflow during sleep.” Dkt. # 2-1, at 6. Sleepbit is a limited liability company organized under Oklahoma law with its principal place of business in Tulsa, Oklahoma. Id. at 5. The membership of Sleepbit consists of individuals who are citizens of Oklahoma and Arkansas and a limited liability company whose members are citizens of Oklahoma. Id. Sleepbit states that it has developed a “non-prescription home airflow self-assessment system . . . which uses a combination of airflow measurements during sleep and a lifestyle/health survey to determine issues related to an individual's sleep health.” Id. at 6. Sleepbit's system requires an individual to purchase an airflow recording device and a mobile app that is compatible with iOS and Android devices. Id. Sleepbit had developed a device that would gather data about a user's airflow during sleep, but it still needed a mobile app that could collect the data from the Sleepbit device. Id.

         On February 13, 2015, the manager of Sleepbit, Steve Wood, contacted Push Software Interactions, Inc (PSI) about developing the mobile app, and the chief executive officer of PSI, Chad Jones, represented that PSI would be willing to develop the mobile app. Id. at 7. Sleepbit and PSI executed a confidentiality agreement under which the parties agreed to keep any confidential information exchanged during the course of their business relationship confidential. Id. The confidentiality agreement contains the following choice of law and forum selection clause:

This Agreement shall be construed under the laws of the State of Oklahoma, notwithstanding any conflict of law provision to the contrary. The forum for any proceeding or suit in law or equity arising from or incident to this Agreement shall be located in the applicable federal court for the Eastern District, Oklahoma, or state court in Tulsa County, Oklahoma.

         Dkt. # 22-1, at 21. Sleepbit subsequently sent a request for proposal to PSI for the development of a Bluetooth-enabled app from testing to commercial launch. Dkt. # 2-1, at 7. On February 23, 2015, PSI submitted a mobile app proposal to Sleepbit and represented that development of the mobile app would take approximately nine to eleven weeks. Id. at 8. PSI submitted an updated proposal eliminating one feature of the mobile app and reducing the contract price by $7, 000. Id. at 9. After the updated proposal was submitted by PSI, Sleepbit began to gather funding and PSI did not immediately begin to work on the mobile app. Id. On June 8, 2015, Jones and Wood spoke about funding for the mobile app project, and Wood advised Jones that Sleepbit had not finalized arrangements to secure the necessary financing. Id.

         Sleepbit acquired the funding needed to proceed with development of the mobile app and, pursuant to the mobile app proposal, wired 50 percent of contract price to PSI. Id. Sleepbit primarily interacted with Jones and Andre Doucette, [1] the product director for PSI, and Jones and Doucette represented to Sleepbit that they were progressing with the mobile app. Id. at 10. Based on these representations, Sleepbit made another payment to PSI in the amount of $5, 075, and Sleepbit sent a Sleepbit device to PSI to use in testing the mobile app. Id. PSI could not collect data using the Sleepbit device and Sleepbit sent a dongle to PSI to use for beta testing. Id. By June 2016, Sleepbit was finalizing a promotional video for its product based on PSI's representations concerning the status of the mobile app. Id. at 11. On July 22, 2018, Sleepbit sent a payment of $15, 881.25 to PSI, but Sleepbit was starting to doubt that PSI was making progress with the mobile app. Id. Sleepbit states that an individual assisting with the development of the Sleepbit device, Bill Ardrey, was able to connect to the mobile app using an iPad and he discovered that the mobile app was not functioning properly. Id. On November 10, 2016, Ardrey contacted Jones and asked for assistance in looking at the data saved to mobile device by the app. Id. Jones responded promptly to Ardrey's request and informed Ardrey that PSI was able to get the mobile app working on iOS devices. Id. at 8-9. Difficulties arose with communication between the Sleepbit device and mobile app, and PSI claimed that any problems were caused by Sleepbit's device. Id. at 12. Sleepbit delivered another Sleepbit device to PSI on January 30, 2017, but the problems with the mobile app were not getting resolved. Id. Jones and Doucette allegedly stopped communicating with Wood about the status of the mobile app. Id.

         On February 16, 2017, representatives of Sleepbit and PSI held a conference call, and Jones agreed to send the iOS and Android source code to Sleepbit. Id. at 13. Sleepbit claimed that it needed the source code to troubleshoot the alleged problems with the device identified by PSI, but Sleepbit had not received the source code as of February 21, 2017. Id. The source code for iOS devices was produced to Sleepbit on March 7, 2018, and Sleepbit claims that there were several problems with the source code. Id. at 13-14. The source code contained “To Do” notes indicating that the source code was not complete, and it appeared that PSI had not worked on the source code for several months. Id. at 14. Sleepbit continued to request status updates on PSI's work on the mobile app, and Jones represented to Sleepbit that PSI was successfully testing the mobile app with the Sleepbit device on iOS and Android devices. Id. Jones informed Wood that PSI was “starting to piece together the elements needed to move to server testing, ” but PSI refused to give an estimate as to when the mobile app would be ready. Id.

         On April 4, 2017, Jones advised Wood that PSI was able to get data off of the mobile app, but the device would return to the wrong page and it appeared that there was a bug or a problem with the software code. Id. at 15. Sleepbit set a firm deadline of April 20, 2017 to submit Sleepbit's iOS platform to Apple for approval and to conduct control group testing on iOS and Android platforms. Id. Jones claimed that there were issues with the risk assessment that affected how the mobile app was working, but Sleepbit believed that this was outside the scope of PSI's work under the parties' contract. Id. Sleepbit informed PSI that it was responsible only for making sure that the mobile app correctly converted in accordance with a risk assessment algorithm. Id. On April 24, 2017, PSI sent builds for the mobile app to Sleepbit, but the builds did not work for alpha testing and the builds appeared to be incomplete. Id. at 16. Wood advised Jones of these problems with the builds, and Jones responded that the builds were intended for review but not for testing. Id. Jones claimed that this was PSI's standard procedure and PSI typically sought customer feedback before completing the builds. Id. In May 2017, Ardrey began testing the mobile app and got an error message when he attempted to download the app onto an iOS device. Id. On May 15, 2017, Sleepbit directed PSI to stop working on the mobile app. Id. The parties continued to communicate over the summer of 2017 and PSI represented that it was close to finishing the mobile app. Id. at 17. However, by August 2017, Sleepbit had decided to cease working with PSI and it intended to hire a new designer for the mobile app. Id. Sleepbit hired another developer to complete the mobile app and none of the work performed by PSI could be used to expedite the new developer's work. Id.

         On July 11, 2018, Sleepbit filed this case in Tulsa County District Court alleging claims of breach of contract, unjust enrichment, and fraud against PSI, Jones, and Doucette. Defendants removed the case to this Court on the basis of diversity jurisdiction. Each defendant has filed a motion to dismiss the case for lack of personal jurisdiction. Dkt. ## 12, 14, 16. Sleepbit asks the Court to transfer this case to the Eastern District of Oklahoma based on the forum selection clause in the confidentiality agreement. Dkt. # 22.


         Plaintiff asks the Court to transfer this case to the Eastern District of Oklahoma, because the confidentiality agreement contains a forum selection clause requiring claims arising under the agreement to be litigated in Tulsa County District Court or the Eastern District of Oklahoma. Dkt. # 22. PSI responds that plaintiff's claims do not arise out of the confidentiality agreement, even under a broad interpretation of that agreement, and Jones and Doucette are not parties to the confidentiality agreement. Dkt. # 28.

         The Court must initially determine if the parties' agreement contains a venue selection clause or a forum selection clause. Unlike a forum selection clause, a venue selection clause authorizes, but does not require, litigation in certain forums and it may permit multiple acceptable forums for litigation. SBKC Serv. Corp. v. 1111 Prospect Partners, L.P., 105 F.3d 578, 582 (10th Cir. 1997). “The existence of a venue selection clause does not impose an absolute duty nor does it endow a party with an absolute right to have every dispute between the parties litigated in the named forum.” Hospah Coal Co. v. Chaco Energy Co., 673 F.2d 1161, 1163 (10th Cir. 1982). On the other hand, forum selection clauses are presumed to be valid and the burden is on the party resisting enforcement to show that enforcement of the clause would be unreasonable under the circumstances. CarnivalCruise Lines, Inc. v. Shute, 499 U.S. 585, 589 (1991); M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972); Milk ‘N' More, Inc. v. Beavert, 963 F.2d 1342, 1346 (10th Cir. 1992). The party resisting enforcement of a forum selection clause “carries a heavy burden of showing that the provision itself is invalid due to fraud or overreaching or that enforcement would be unreasonable and unjust under the circumstances.” Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 957 (10th Cir. 1992). The Tenth Circuit has found that forum selection clauses fall into two general categories - mandatory or permissive. Excell, Inc. v. Sterling Boiler & Mechanical, Inc., 106 F.3d 318, 321 (10th Cir. 1997). A mandatory forum ...

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