PRN Medical Services LLC v. Neilson et al

Filing 74

ORDER that Defendant Wilmington Medical Supply, Inc.'s 49 Motion to Dismiss is DENIED. Signed by Judge G Murray Snow on 12/15/2014.(LFIG)

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WO

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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PRN Medical Services LLC,

No. CV-14-01047-PHX-GMS

Plaintiff,

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v.

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ORDER

Michael Neilson, et al.,

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Defendants.

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Pending before the Court is Defendant Wilmington Medical Supply, Inc.’s Motion

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to Dismiss for Lack of Personal Jurisdiction. (Doc. 49.) For the following reasons, the

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Motion is denied.

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BACKGROUND

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PRN Medical Services LLC (“PRN”) brings suit against several of its former

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employees alleging unfair competition. PRN also brings an unjust enrichment claim

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against Defendant Wilmington Medical Supply, Inc. (“Wilmington”), the company for

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whom these former employees currently work.

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Specific to the current Motion, PRN alleges that Defendant John Pearce, while still

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an employee of PRN, sent an email to a director at Wilmington containing personal

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health information of PRN customers. This personal information originated from and is

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archived at PRN’s Phoenix headquarters. PRN also alleges that, immediately prior to

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their departure to work for Wilmington three of its former employees illegally

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downloaded confidential information of thousands of PRN’s customers, including more

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than 1,500 of PRN’s Arizona customers, from PRN’s Arizona computer servers.

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Wilmington has a sales representative in Arizona, who began employment with

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Wilmington on February 24, 2014, approximately the same time as the five defendants

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left their PRN employ to work for Wilmington. Wilmington asserts that this Court has no

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jurisdiction over PRN’s claims against it.
DISCUSSION

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I.

Legal Standard

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Because the Court is resolving this Motion without holding an evidentiary hearing,

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PRN “need make only a prima facie showing of jurisdictional facts to withstand the

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motion.” Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995); see Brainerd v.

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Governors of the Univ. of Alberta, 873 F.2d 1257, 1258 (9th Cir. 1989). The burden

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under the prima facie case is minimal: plaintiffs “need only demonstrate facts that if true

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would support jurisdiction over the defendant.” Ballard, 65 F.3d at 1498. In addition,

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“[c]onflicts between parties over statements contained in affidavits must be resolved in

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the plaintiff’s favor.” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th

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Cir. 2004) (citing A T & T v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir.

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1996)).

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To establish the prima facie case for personal jurisdiction, the plaintiff has the

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burden of showing that: (1) the forum state’s long-arm statute confers jurisdiction over

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the nonresident defendant; and (2) the exercise of jurisdiction comports with principles of

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due process. Omeluk v. Langsten Slip & Batbyggeri A/S, 52 F.3d 267, 269 (9th Cir.

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1995). Arizona’s long-arm statute confers jurisdiction to the maximum extent allowed by

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the Due Process Clause of the United States Constitution. Ariz. R. Civ. P. 4.2(a); Doe v.

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American Nat’l Red Cross, 112 F.3d 1048, 1050 (9th Cir. 1997). Due process requires a

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nonresident defendant to have “certain minimum contacts with [the forum] such that the

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maintenance of the suit does not offend traditional notions of fair play and substantial

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justice.” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal citation

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omitted). There are two types of personal jurisdiction, general and specific. Burger King

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Corp. v. Rudzewicz, 471 U.S. 462, 473 n.5 (1985). PRN does not allege that the Court

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possesses general personal jurisdiction over Wilmington; it claims only that specific

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personal jurisdiction exists.

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A.

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Specific jurisdiction exists if (1) the defendant purposefully directed tortious

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activities at the forum or a resident thereof or performed some act by which he

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purposefully availed himself of the privileges of conducting activities in the forum, (2)

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the claims arise out of or result from the defendant’s forum-related activities, and (3) the

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exercise of jurisdiction is reasonable. See Bancroft & Masters, Inc. v. Augusta Nat’l Inc.,

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223 F.3d 1082, 1086 (9th Cir. 2000); Brainerd, 873 F.2d at 1259.

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Specific Personal Jurisdiction

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Purposeful Direction

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A court has specific jurisdiction over a defendant where the intended effects of the

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defendant’s non-forum conduct were purposely directed at and caused harm in the forum

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state. Calder v. Jones, 465 U.S. 783, 788–90 (1984); see also Pebble Beach Co. v. Caddy,

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453 F.3d 1151, 1155–56 (9th Cir. 2006) (noting that purposeful direction analysis is

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appropriate when “all of [the defendant’s] action identified by [the plaintiff] is action

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taking place outside the forum”); Sinatra v. Nat’l Enquirer, Inc., 854 F.2d 1191, 1195

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(9th Cir. 1988) (“[T]he decisions of this court have interpreted the holdings of Calder and

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Burger King as modifying the purposeful availment rubric to allow ‘the exercise of

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jurisdiction over a defendant whose only “contact” with the forum is the “purposeful

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direction” of a foreign act having effect in the forum state.’”) (quoting Haisten v. Grass

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Valley Med. Reimbursement Fund, 784 F.2d 1392, 1397 (9th Cir. 1986)).

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Courts evaluate purposeful direction using the Calder “effects test.” See Brayton

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Purcell LLP v. Recordon & Recordon, 606 F.3d 1124, 1128 (9th Cir. 2010). Under the

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“effects test,” the defendant must allegedly have: “(1) committed an intentional act, (2)

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expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to

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be suffered in the forum state.” Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1111 (9th

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Cir. 2002). All three elements of the test must be satisfied. Schwarzenegger v. Fred

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Martin Motor Co., 374 F.3d 797, 805 (9th Cir. 2004). “A finding of ‘express aiming’ . . .

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does not mean ‘that a foreign act with foreseeable effects in the forum states always gives

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rise to specific jurisdiction.’” Dole, 303 F.3d at 1112 (quoting Bancroft, 223 F.3d at

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1087).

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The “intentional” requirement is not a high bar, requiring only “an intent to

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perform an actual, physical act in the real world.” See Schwarzenegger, 374 F.3d at 806.

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The express aiming requirement is another way of saying that there must be “something

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more” than the foreseeability of an effect in the forum state. Brayton Purcell, 606 F.3d at

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1129. Under the causing harm requirement, the Ninth Circuit has made it clear that any

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intentional conduct must be “targeted at a plaintiff whom the defendant knows to be a

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resident of the forum state.” Bancroft, 223 F.3d at 1087.

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Here, PRN demonstrates facts sufficient to show purposeful direction. PRN

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alleges that Wilmington conspired with several of PRN’s former employees to

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appropriate confidential information from PRN’s servers located in Arizona. Similarly,

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PRN alleges that one of Wilmington’s directors accepted confidential information in an

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email sent from one of PRN’s former employees, which originated, and is archived, in

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Arizona. These were intentional actions, expressly aimed at information housed in

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Arizona, and targeted at PRN, an Arizona corporation. In a similar case, Aerotech

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Holdings, Inc. v. Alliance Aerospace Eng’g, LLC, a non-resident company was found to

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have purposefully directed its activities at Texas, the forum state, by “using confidential

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information that belong[ed] to a Texas company to target customers that are based in

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Texas.” 650 F. Supp.2d 594, 600–01 (N.D. Tex. 2009). Just as in Aerotech, in the present

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case PRN alleges that Wilmington used confidential information gathered by former

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employees of PRN to target PRN’s customers’ confidential information. See also

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Panavision Int’l, L.P. v. Toeppen, 141 F.3d 1316, 1321 (9th Cir. 1998) (holding that acts

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directed at limited partnership whose principal place of business in California constituted

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purposeful direction at California). Because many of these customers were residents of

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Arizona, and more importantly, because PRN alleges Wilmington knew its activities

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would cause harm to PRN, an Arizona corporation, Wilmington purposefully directed its

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activities at Arizona.

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In sum, PRN sufficiently alleges Wilmington “(1) committed an intentional act,

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(2) expressly aimed at the forum state, (3) causing harm that the defendant knows is

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likely to be suffered in the forum state.” Dole, 303 F.3d at 1111. Thus, Wilmington

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purposely directed its actions at Arizona.

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2.

“Arising out of” Requirement

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The Ninth Circuit has adopted a “but for” test for determining whether a plaintiff’s

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cause of action arises out of a defendant’s forum-related activities. See Omeluk, 52 F.3d

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at 271. The “arising out of” requirement is met if, but for the contacts between the

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defendant and the forum state, the cause of action would not have arisen. See Terracom v.

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Valley Nat. Bank, 49 F.3d 555, 561 (9th Cir. 1995).

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As noted above, PRN has alleged that Wilmington acted in concert with several of

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PRN’s former employees to access confidential information of PRN customers. Further,

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PRN alleges that Wilmington was unjustly enriched because of the actions of PRN’s

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former employees. The “arising out of” requirement is satisfied here because but for

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Wilmington’s actions in concert with PRN’s former employees, it would not have been

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unjustly enriched.

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3.

Reasonableness Requirement

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An unreasonable exercise of jurisdiction violates the Due Process Clause even if

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the “purposeful availment” and “arising out of” requirements of the specific jurisdiction

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test are satisfied. See Int’l Shoe Co. v. State of Wash., Office of Unemployment Comp. &

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Placement, 326 U.S. 310, 316 (1945); Ziegler v. Indian River Cnty., 64 F.3d 470, 474–75

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(9th Cir. 1995). A district court presumes, however, that its exercise of jurisdiction over

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a defendant is reasonable if the first two requirements of the specific jurisdiction test are

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met. See Ballard, 65 F.3d at 1500. If the first two requirements are satisfied, then the

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burden of proof shifts and the defendant must “‘present a compelling case that the

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presence of some other considerations would render jurisdiction unreasonable.’” Id.

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(quoting Burger King, 471 U.S. at 477).

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The Ninth Circuit considers the following seven factors to determine whether the

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exercise of specific jurisdiction over a defendant is reasonable: (1) the extent of the

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defendant’s purposeful interjection into the forum state; (2) the burden on the defendant

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of litigating in the forum; (3) the extent of conflict with the sovereignty of the

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defendant’s state; (4) the forum state’s interest in adjudicating the dispute; (5) the most

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efficient judicial resolution of the dispute; (6) the importance of the forum to the

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plaintiff’s interest in convenient and effective relief; and (7) the existence of an

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alternative forum. See Ziegler, 64 F.3d at 475 (citing Terracom, 49 F.3d at 561); World–

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Wide Volkswagen, 444 U.S. at 292 (listing several of the seven factors).

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These factors do not suggest that litigation in Arizona is unreasonable or unfair.

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Wilmington targeted its activities at PRN, an Arizona company, and by so doing

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interjected itself into Arizona. Wilmington is based in North Carolina, and while

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traveling to Phoenix would create a burden on Wilmington, the burden is not

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unreasonable. There is no conflict with North Carolina’s sovereignty in litigating the case

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in Arizona, and Arizona has an interest in enforcing laws in its geographic boundaries.

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The most efficient judicial resolution of the dispute is a neutral factor because either

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forum would provide for efficient judicial resolution of this matter. PRN has an interest

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in obtaining relief in Arizona, but North Carolina is an alternative forum. No factor

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weighs substantially in favor of litigating the case in North Carolina, and considered as a

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whole these factors do not suggest that litigating in Arizona presents a “severe

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disadvantage” to Wilmington. Burger King, 471 U.S. at 477 (quoting Bremen v. Zapata

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Off-Shore Co., 407 U.S. 1, 18 (1972).
CONCLUSION

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Construing the pleadings and affidavits in favor of PRN, it has met the prima facie

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burden of showing that this Court may exercise personal jurisdiction over Wilmington.

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Wilmington has failed to show that this exercise of jurisdiction would be unreasonable or

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unfair.

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IT IS THEREFORE ORDERED that Defendant Wilmington Medical Supply,
Inc.’s Motion to Dismiss for Lack of Personal Jurisdiction (Doc. 49) is DENIED.
Dated this 15th day of December, 2014.

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