915 Labs, LLC v. Petersen

Filing 50

OPINION AND ORDER granting 28 Motion to Intervene and 29 Motion to Dismiss by Chief Judge Marcia S. Krieger on 5/19/18. (dkals, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Chief Judge Marcia S. Krieger
Civil Action No. 17-cv-02430-MSK-MJW
915 LABS, LLC,
Plaintiff,
v.
KEVIN PETERSEN,
Defendant/Third Party Plaintiff,
v.
MICHAEL DE CARO,
Third Party Defendant.
______________________________________________________________________________
OPINION AND ORDER GRANTING MOTION TO DISMISS AND MOTION TO
INTERVENE
______________________________________________________________________________
THIS MATTER comes before the Court pursuant to Microwerk, LLC’s Motion to
Intervene (# 28), to which no party has responded; and Third Party Defendant Michael De Caro’s
Motion to Dismiss (# 29) the claims against him, Third Party Plaintiff Keven Petersen’s response
(# 35), and Mr. De Caro’s reply (# 37).
FACTS
As relevant here, according to Mr. Petersen’s Third-Party Complaint (# 27), Mr. Petersen
was previously involved with the Plaintiff 915 Labs, LLC (“915”), a business engaged in the use
of microwave technology to pasteurize and sterilize prepared foods. Mr. Petersen eventually
grew dissatisfied with the direction that 915 was taking. In late 2016, Mr. Petersen made contact
with Mr. De Caro, a contractor performing sales work for 915, and the two men executed a

1

mutual non-disclosure agreement in furtherance of discussions about forming a new, competing
business called Modern Advantage Technology, LLC (“MAT”). As part of those discussions,
Mr. De Caro created a shared file on his computer, containing “marketing materials” that Mr. De
Caro had used as part of his work with 915. Mr. Petersen and Mr. De Caro jointly formed MAT
in mid-2017, and Mr. De Caro was tasked with assembling its information technology
infrastructure, such as web domains and e-mail servers. Disagreements between the two men
quickly ensued and Mr. De Caro exited MAT in acrimonious circumstances. As part of his
departure, Mr. De Caro “seized control” of MAT’s web domain and e-mail infrastructure, and
refused to return it. Moreover, Mr. De Caro, in an effort to sabotage Mr. Petersen and MAT,
reached out to 915 and “provided false information” to it, accusing Mr. Petersen of misusing
915’s confidential information. (This prompted 915 to bring the primary claims in this action,
alleging that Mr. Petersen misappropriated 915’s trade secrets and breached various contractual
agreements he had with 915.) Mr. Petersen contends that, to the extent that 915’s confidential
information was improperly disclosed, it was disclosed by Mr. De Caro, not by himself.
Based on these facts, as to Mr. De Caro, Mr. Petersen asserts a single third-party claim
for conversion under an unspecified jurisdiction’s common law, arguing that Mr. De Caro
“exercised ownership over Mr. Petersen’s and [MAT’s] domain, email servers, and email
accounts” with the intent of depriving them of the use of these items.
Mr. De Caro now moves to dismiss (# 29) Mr. Petersen’s claim against him for lack of
personal jurisdiction. Mr. De Caro notes that he is a citizen of the State of Washington and has
no particular contacts with the State of Colorado.
Separately, MAT (also known as Microwerk) moves to intervene (# 28) in order to assert
its own third-party claims against Mr. De Caro and 915. Specifically, it contends that Mr. De

2

Caro misappropriated MAT’s own trade secret information and conveyed it to 915, who, in turn,
improperly used the information to interfere with MAT’s contracts and prospective relations with
MAT’s own partners and customers. No party has opposed MAT’s request to intervene.
ANALYSIS
A. Personal jurisdiction over Mr. De Caro
1. Personal jurisdiction
The party asserting claims against a defendant bears the burden of proving that the Court
has personal jurisdiction over that defendant. AST Sports Science, Inc. v. CLF Distribution Ltd.,
514 F.3d 1054, 1056 (10th Cir.2008). At the preliminary stages of a lawsuit, the Court may elect
to conclusively resolve issues of personal jurisdiction by conducting an evidentiary hearing on
the matter; alternatively, it my defer full consideration of the jurisdictional question until later in
the case, and require only a prima facie showing, via affidavit or other evidence, of facts that, if
true, would support the exercise of personal jurisdiction over the defendant. At this stage, the
Court resolves any factual disputes in the light most favorable to the plaintiff. Id.
Due to Colorado’s expansive Long-Arm Statute, the jurisdictional inquiry has only two
prongs: (i) an evaluation of whether the defendant has sufficient “minimum contacts” with the
forum state, such that he “should reasonably anticipate being haled into court there”; and (ii)
whether the exercise of personal jurisdiction over the defendant would offend traditional notions
of fair play and substantial justice. Id., citing World –Wide Volkswagon Corp. v. Woodson, 444
U.S. 286, 297 (1980) and Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 113 (1987).
The “minimum contacts” inquiry, in turn, also has two strands: “general” and “specific”
jurisdiction. The Supreme Court has recently clarified and narrowed the minimum contacts
inquiry: “general” personal jurisdiction exists only in the state of an individual’s domicile.

3

Bristol-Meyers Squibb Co. v. Superior Court, 137 S.Ct. 1773, 1779-80 (2017). Otherwise, the
Court considers whether it has “specific” jurisdiction over the defendant by examining the nature
and extent of the defendant’s contacts with the forum jurisdiction, but the Court considers only
those contacts that arise out of or relate to the claims asserted against the defendant. Id.
The Court reflexively rejects Mr. Petersen’s argument that Mr. De Caro is subject to
general jurisdiction in Colorado; it is undisputed that Mr. De Caro is domiciled in Washington.
Thus, the only question for the Court is whether Mr. De Caro’s contacts with Colorado,
as those contacts relate to Mr. Petersen’s conversion claim, are significant. To perform that
inquiry, the Court first delineates the contours of Mr. Petersen’s claim for conversion, the only
claim Mr. Petersen asserts against him.1
The parties do not specify which state supplies the substantive law for the claim, and for
purposes of this Order, the Court will assume that Colorado law controls.2 Under Colorado law,
the common-law tort of conversion consists of: (i) the defendant exercising dominion or control;
(ii) over the property of another; (iii) without the owner’s authorization. Itin v. Ungar, 17 P.3d
129, 135 n. 10 (Colo. 2000). Factually, the conversion claim arises from the allegations that: (i)
“Mr. De Caro seized control of the domain, emails servers, and email accounts used by Mr.
Petersen and [MAT] and locked them out,” Docket # 27, ¶ 49, and that he “has refused to
relinquish control of the domain, email servers, and email accounts to Mr. Petersen and [MAT]
1

C.f. Mr. Petersen’s response brief, which suggests that “Petersen has impleaded De Caro
claiming that De Caro obtained information from 915 Labs . . ., which De Caro disclosed to [a
competitor].” Docket # 35 at 10. Although this assertion is the basis for Mr. Petersen’s defense
to 915’s claims against him (“I didn’t misappropriate 915’s information, Mr. De Caro did”), Mr.
Petersen’s third-party complaint
2

Washington state law could govern the claim. Under Washington law, conversion is: (i)
the unjustified, (ii) willful (iii) interference with a chattel, (iv) which deprives the owner of
possession. Potter v. Washington State Patrol, 196 P.3d 691, 696 (Wa. 2008). The slight
difference in elements does not materially affect the analysis herein.
4

despite multiple requests,” ¶ 51; see also ¶ 79-83. Although Mr. Petersen’s Complaint goes on
to assert that Mr. De Caro has made use of the converted domain and e-mail servers “to his
benefit and in connection with the business of 915,” Mr. De Caro’s subsequent use of the
converted property is not an act that is relevant to the tort of conversion or its remedy. See e.g.
Glenn Arms Assocs. v. Century Mortg. & Inv. Corp., 680 P.2d 1315, 1317 (Colo.App. 1984)
(remedy for conversion is value of the converted property at the time and place of the
misappropriation); Saddle Mountain Minerals, LLC v. Joshi, 95 P.3d 1236, 1239 (Wa. 2004)
(same).
Thus, the Court turns to Mr. Petersen’s affidavits and other evidence to determine
whether, and to what extent, Mr. De Caro’s actions to taking control of MAT’s domain and email servers occurred in Colorado. The Court finds no evidence that suggests as much. Neither
Mr. Petersen’s affidavits, nor his response cites to or discuss the circumstances of Mr. De Caro’s
seizure of these items. (Mr. De Caro’s own affidavit asserts, without contradiction, that “all of
the domains, servers, and e-mails related to Petersen’s conversion claim against me are
maintained and stored outside of Colorado.” The injury caused by the conversion was felt by the
rightful owners of the converted property – Mr. Petersen and MAT – at their residence in the
state of Washington, not Colorado. Accordingly, Mr. Petersen has not come forward with
evidence demonstrating that Mr. De Caro had any contacts with Colorado that relate to the
conversion claim, and thus, this Court lacks personal jurisdiction over Mr. De Caro for purposes
of that claim.
2. Pendent jurisdiction
Mr. Petersen argues that, even if the Court lacks traditional personal jurisdiction over Mr.
De Caro, it can nevertheless assert “pendent personal jurisdiction” over him. Citing U.S. v.

5

Botefuhr, 309 F.3d 1263, 1272 (10th Cir. 2002). As Botefhur explains, “pendent personal
jurisdction. . . exists when a court possesses personal jurisdiction over a defendant for one claim,
lacks an independent basis for personal jurisdiction over the defendant for another claim that
arises out of the same nucleus of operative fact, and then, because it possesses personal
jurisdiction over the first claim, asserts personal jurisdiction over the second claim.” By its
terms, this doctrine cannot apply here: Mr. De Caro is named only as a defendant on one claim in
this action – Mr. Petersen’s conversion claim – and the Court has already determined that it lacks
personal jurisdiction over Mr. De Caro on that claim. Thus, there is no existing personal
jurisdiction over Mr. De Caro that Mr. Petersen can “piggyback” on. Accordingly, the Court
rejects Mr. Petersen’s argument that pendent personal jurisdiction applies here.
3. Attorney fees
Because Mr. Petersen’s third-party complaint against Mr. De Caro must be dismissed for
lack of personal jurisdiction, Mr. De Caro requests an award of attorney fees pursuant to C.R.S.
§ 13-17-201. That statute provides that when an action is brought against a defendant in tort, and
is dismissed on Rule 12 grounds, the defendant is entitled to an award of the reasonable fees he
incurred in defending the action. As Mr. De Caro notes, the statute applies to state law claims
brought in federal court under diversity jurisdiction. Jones v. Denver Post Corp., 203 F.3d 748,
757 (10th Cir. 2000).
By all appearances, Mr. De Caro is entitled to relief under this statute. Mr. Petersen’s
response brief does not address Mr. De Caro’s request for fees, and in the absence of opposition,
the Court grants Mr. De Caro’s motion. Mr. De Caro may file a motion for attorney fees within
14 days of this Order.

6

B. MAT’s Motion to Intervene
MAT moves to file a third-party complaint of its own, naming Mr. De Caro and 915 as
Defendants, alleging that they misappropriated MAT’s trade secrets. No party has objected to
MAT’s request, and the Court therefore grants it.3 MAT shall file its third-party complaint
within 7 days of this Order, and shall effect service on the third-party defendants under Fed. R.
Civ. P. 4 within 28 days of this Order.
CONCLUSION
For the foregoing reasons, Mircowerk/MAT’s Motion to Intervene (# 28) is GRANTED.
Mr. De Caro’s Motion to Dismiss (# 29) is GRANTED, and the claim in Mr. Petersen’s ThirdParty Complaint as to Mr. De Caro is DISMISSED for lack of personal jurisdiction.
Dated this 19th day of May, 2018.
BY THE COURT:

Marcia S. Krieger
Chief United States District Judge

3

The Court offers no opinion as to whether MAT’s tendered complaint states cognizable
claims under Fed. R. Civ. P. 12(b)(6), or whether it appropriately invokes personal jurisdiction
under Fed. R. Civ. P. 12(b)(2). At a minimum, however, the Court observes that, unlike Mr.
Petersen’s complaint, MAT’s tendered complaint alleges a claim of misappropriation of trade
secrets against Mr. De Caro, in addition to the jurisdictionally-defective conversion claim.
7