Evidentiary hearing scheduled over alleged forged documents

Where the defendants presented “credible evidence” that alleged employment agreements on which plaintiffs based their claims of breach and conspiracy to steal trade secrets were forgeries, an evidentiary hearing will be held to determine if a fraud was perpetrated upon the court.

Background

Power Home Solar LLC, or PHS, sued its competitor, Sigora Solar LLC, and two of its former sales representatives, Raven Stephens and Brian Ventura. PHS alleges that defendants conspired together to breach Stephens’s and Ventura’s employment agreements, steal its trade secrets and bring it competitive harm. Defendants moved to dismiss PHS’s 12-count complaint under Rule 12(b)(6).

But what began as a routine motion to dismiss has taken a potentially ominous turn. Defendants allege—and they offer what appears to be credible evidence to back it up—that they never signed these employment agreements, and that the employment agreements PHS presented in this lawsuit are forgeries.

PHS alleges that Stephens executed a “Restrictive Covenants and Invention Assignment Agreement” approximately eight months after she started working for PHS, on April 1, 2019. Defendants submitted a declaration from Muhammad Naveed, a computer-science professional who has expertise in “network security.” Naveed reviewed the IP address affixed on Stephens’s alleged employment agreement and determined “based on the most accurate available source . . . that the IP address most likely tracks to Elkridge, Maryland.”

In Stephens’s declaration, she states that before being served with the complaint in this matter, she had never seen, received, reviewed or signed a copy of the employment agreement. Stephens also declared, under penalty of perjury, that she was physically present in Charlottesville on April 1, 2019, at 7:41 p.m., and did not visit Elkridge, Maryland, on that date.

To date, PHS has failed to produce Ventura’s employment agreement. Ventura asserts in his declaration that he “never executed an agreement entitled ‘Restrictive Covenants and Invention Assignment Agreement’” before or after starting his employment with PHS.

In May 2020, PHS filed a practically identical action in North Carolina superior court against Sigora and four of its other former employees who left PHS to work for Sigora. There, PHS alleges that two of its former employees signed the same employment agreements that Stephens and Ventura allegedly signed in this case. The defendants in the North Carolina action have brought counterclaims for forgery and fraud, as well as affirmative defenses of forgery, fraud and fraud on the court. In short, all four former employees against whom PHS now brings claims assert that PHS has forged their signatures on the employment agreements that form the basis for those claims.

Analysis

The court finds that an evidentiary hearing is essential to determine if PHS has perpetrated fraud on the court by initiating a lawsuit based on forged documents; whether a contractual relationship exists between the parties; whether that agreement controls this court’s review of the legal claims and if not, what the next appropriate step in this litigation is. The parties should be prepared to present all relevant witnesses, including the litigants in the North Carolina action if necessary. PHS should also be prepared to produce Ventura’s employment agreement, if it exists.

The court finds that these allegations are so serious that they must take precedence over the resolution of the pending motion to dismiss. In any event, the court cannot decide threshold matters in the motion to dismiss without resolving these allegations of fraud. Despite the importance of the motion to dismiss, the issue of whether the underlying basis of this lawsuit is fraudulent is more important and must be resolved with haste. The court will therefore hold the motion to dismiss in abeyance pending limited and targeted discovery and the evidentiary hearing.

The court also notes that if the employment agreements are forgeries, there will be a significant question of whether it will be appropriate to levy sanctions against PHS. Fraud on the court may result in dismissal of the case.

The court also recognizes that the evidentiary hearing will take place during the COVID-19 pandemic and while the standing order is in place that generally prohibits inperson hearings and jury trials in this court through March 1, 2021. The order, however, gives discretion to the presiding judge to conduct hearings in person “should the exigencies of that case and the interests of justice so require.” The court finds that the exigencies of this case and the interests of justice require a hearing before March 1, 2021.

Power Home Solar LLC v. Sigora Solar LLC, Case No. 3:20-cv-00042, Dec. 16, 2020. WDVA at Charlottesville (Cullen). VLW 020-3-616. 14 pp.