MAXLITE, INC. v. ATG ELECTRONICS, INC. et al

Filing 162

OPINION. Signed by Judge John Michael Vazquez on 1/17/17. (DD, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
OPINION NOT FOR PUBLICATION

MAXLITE, INC.. a New Jersey Corporation,
f/k/aSK AMERICA. [NC.. d’bia MAXL[TE.
Civil Action No. 15-1116

Plaintiff
V.

ATO ELECTRONICS, [NC.. JAMES D.
STEEDLY. SOPHIA C. GALLEHER. and
MATTHEW KIM,
Defendants.

John Michael Vazgucz, U.S.D.J.
This matter comes before the Court on Defendant ATG Electronics, Incorporated’s
(“ATG”) motion to amend this Court’s Order and certify a question for interlocutory appeal
pursuant to 28 U.S.C.

§

1292(b).

Plaintiff MaxLite, Incorporated (“MaxLite”) opposes the

motion.1 Defendant’s motion seeks an interlocutory appeal of this Court’s Opinion and Order
finding that it had personal jurisdiction over Defendant. See D.E. M7, 148. This motion was
decided without oral argument pursuant to Federal Rule of Civil Procedure 78 and Local CiviL
Rule 78.1. The Court has considered the parties’ submissions and, for the reasons stated below,
the motion is denied.

Defendant’s brief in support of its motion will be referred to hereinafter as “DeE Br.” (D.E. 150),
Plaintiffs opposition will be referred to hereinafter as “P1. Opp.” (D.E. 151), and Defendant’s
reply brief will be referred to hereinafter as “Def. Reply” (D.E. 155).

I.

BACKGROUND
On February 12, 2015, MaxLite filed its initial Complaint in this matter against Defendants

Sophia C. Galleher (“Galleher”), Matthew Kim (“Kim”), James D. Steedly (“Steedly”) (together,
“Employee Defendants”), and ATG. D.E. 1. MaxLite filed an Amended Complaint on June 23,
2015. D.E.

g72

On March 12, 2015, prior to the filing of the FAC, ATG and the Employee

Defendants moved to dismiss the Complaint for lack of personal jurisdiction or, in the alternative,
to transfer the case to the Central District of California. D.E. 17. Oral argument was held on April
21, 2015 before Judge Wigenton. D.E. 56. Judge Wigenton denied the motion asto the Employee
Defendants, finding their contacts with the State of New Jersey sufficient to allow the court to
exercise in personam jurisdiction over them. D.E. 63

¶

I. However, Judge Wigenton found that

MaxLite had “not presented sufficient evidence to meet its burden of showing that Defendant ATG
has contacts with the State of New Jersey sufficient for this Court to exercise in personarn
jurisdiction over ATG.”

Id.

¶

2.

Yet, the Court permitted Plaintiff to “conduct limited

jurisdictional discovery on the issue.” Id.

¶ 9.

Judge Wigenton denied the motion to transfer as to

the Employee Defendants and held in abeyance her ruling as to ATG pending the outcome of the
discovery. Id.
Following jurisdictional discovery, ATG again moved to dismiss the FAC for lack of
personal jurisdiction.

D.E. 138. This Court issued an Opinion and Order finding that it had

personal jurisdiction over ATG. See D.E. 147, 148. While the Court found that it did not have
general jurisdiction over ATG, it held there were sufficient contacts to have specific jurisdiction.

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Plaintiffs First Amended Complaint will be referred to hereinafter as “FAC” (D.E. 87).
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Id. Defendant proceeded to file the current motion, seeking leave to amend the Court’s Order and
file an interlocutory appeal on the issue of personal jurisdiction over ATG. Def. Br.
LEGAL STANDARD

II.

The statute governing interlocutory appeals, 28 U.S.C.

§ 1292(b), provides in relevant part:

When a district judge, in making in a civiL action an order
not otherwise appealable under this section, shall be of the
opinion that such order involves a controlling question of
law as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation,
he shall so state in writing in such order. The Court of
Appeals which would have jurisdiction of an appeal of such
action may thereupon, in its discretion, permit an appeal to
be taken from such order[.]
Thus, a district court may certify a non-final order for interlocutory appeal where the order: “(I)
involve[s] a controlling question of law, (2) offer[s] substantial ground for difference of opinion
as to its correctness, and (3) if appealed immediately [would] materially advance the ultimate
termination of the litigation.” Katz v. Carte Blanche Corp., 496 F.2d 747, 754 (3d Cir. 1974)
(internal quotation marks omitted). A controlling question of law is one in which, either: (1) “if
erroneous, would be reversible error on final appeal;” or (2) is “serious to the conduct of litigation,
either practically or legally.” Id. at 755. “[Q]uestions about a district court’s application of facts
of the case to established legal standards are not controlling questions of law for the purposes of
section 1292(b).” Morgan

i’.

Ford Motor Co., No. 06-1080, 2007 WL 269806, at *2 (D.N.J. Jan.

25, 2007).
A substantial ground for difference of opinion must arise “out of genuine doubt as to the
correct legal standard.” Kapossv v. McGraw-Hill, Inc., 942 F. Supp. 996, 1001 (D.N.J. 1996).
Mere disagreement with the district court’s ruling is not enough. Id.

Rather, “[a] substantial

ground for difference of opinion exists where reasonable jurists might disagree on an issue’s
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resolution, not merely where they have already disagreed.” Reese v. BP Exploration (Alaska) Inc.,
643 F.3d 681, 688 (9th Cir. 2011). Therefore, “when novel legal issues are presented, on which
fair-minded jurists might reach contradictory conclusions, a novel issue may be certified for
interlocutory appeal without first awaiting development of contradictory precedent.” Id.
Lastly, certification would materially advance the ultimate termination of the litigation
“where the interlocutory appeal eliminates: (1) the need for trial; (2) complex issues that would
complicate trial; or (3) issues that would make discovery more costly or burdensome.” F.T.C.
Wvndham Worlthtide Corp., 10 F. Supp. 3d 602, 635 (D.N.J. 2014). This element does not require
a movant to establish that an appeal would guarantee termination of the litigation, but rather
“requires the court to analyze whether an immediate appeal mciv materially advance the
termination of the litigation.”

its.

cx reT Miller v. SmithKline Beecham Corp., No. 13-2382, 2013

WL 6506570, at *3 (M.D.Pa. Dec. 12, 2013) (emphasis in original).
The burden is on the movant to demonstrate that all three requirements are met. Piacentile
v. Thorpe, No. 12-7156, 2016 WL 3360961, at *2 (D.N.J. June 8, 2016). However, even if all
three criteria are met, “the district court may still deny certification, as the decision is entirely
within the district court’s discretion.” Id. Further, Section 1292(b) “is to be used sparingly and
only in exceptional circumstances that justify a departure from the basic policy of postponing
review until the entry of the final order.” Acosta v. Pace Local 1-300 Health Finid, No. 04-3885,
2007 WL 1074093, at *1 (D.N.J. Apr. 9, 2007) (internal quotation marks omitted); see also
Kapossv, 942 F. Supp. at 1001 (stating that interlocutory appeal is “used sparingly” since it is “a
deviation from the ordinary policy of avoiding piecemeal appellate review of trial court decisions
which do not terminate the litigation”) (internal quotation marks omitted).

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III.

DISCUSSION
Defendant argues that all three elements have been met, while Plaintiff counters that none

have. The Court determines that Defendant has failed to meet its burden as to the second element.
As a result, the Court does not reach the first or third element, and denies the motion.
Defendant asks the Court to certify the following question: “whether a district court may
assert personal jurisdiction over a nonresident defendant on the basis of the defendant’s knowledge
of a forum selection clause contained in a contract to which the defendant was a non-signatory
under the narrow (‘alder effects test adopted by the United States Supreme Court and the Third
Circuit Court of Appeals.” Del’. Br. at 1.
The fundamental flaw in Defendant’s request is that the issue it asks the Court to certify
does not accurately reflect the Court’s opinion. The material omissions from the proposed question
are numerous, As to the forum selection clause, Defendant omits that: it was contained in an
employment agreement, the employment agreement also contained non-solicitation and noncompetition clauses, Defendant was aware of the contract’s provisions before offering positions to
its competitor’s (MaxLite’s) employees, Defendant paid for New Jersey counsel to review the
contract before hiring Plaintiffs employees, and Defendant knew that Plaintiff was headquartered
in New Jersey. See D.E. 147, at 7-10. Defendant further omits that it was competing with Plaintiff
in New Jersey and, critically, at least one of the employees hired was tasked with increasing
Defendant’s business in New Jersey. Id. at 11-12.
salesperson who formerly represented Plaintiff.

Indeed, one of the employees recruited a

Id. at 12.

The same employee streamlined

Defendant’s sales process in New Jersey. Id. These are not all of the critical facts omitted from
Defendant’s request, but the crucial omissions oniy serve to underscore the shortcomings of
Defendant’s motion.

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Defendant raises three arguments in support of the second element: the Court did not apply
the proper legal standard, the Third Circuit has not enforced a forum selection clause against a
non-signatory, and the Court itself has expressed concern over whether personal jurisdiction exists.
DeE Br. at 4-li. Each argument will be addressed in turn.
Defendant argues that the Third Circuit has endorsed a “narrow” Ca/tier effects test, which
the Court did not apply. Id. at 4-6. By way of background, as was discussed at length in the
Court’s Opinion, the test stems from the Supreme Court’s decision in Ca/tier v. Jones, 465 U.s.
783 (1984), and sets forth the standards for a finding specific personal jurisdiction when an
intentional tort is asserted. See D.E. 147, at 17. In IMO Industries, Incorporated

i’.

Kicker! AG,

the Third Circuit addressed the Cattier effects test and noted the majority of Circuits adopted a
bnaI.ro\v construction,” while one Circuit

—

the Seventh

—

adopted a broader view. 155 F.3d 254,

26 1-64 (3d Cir. 1998). The Third Circuit followed the majority of Circuits, adopting the narrow
view of Qilder. Id. at 264-65.
As pertinent to this case, the Court did not follow the Seventh Circuit’s view which was
rejected by the Third Circuit.

Instead, the Court followed IIJU, expressly citing the relevant

language in the Court’s Opinion. D.E. 147 at 17. Thus, Defendant’s argument that the Court
applied the wrong standard is simply erroneous.
Defendant also claims that while the Court may have cited to IMO, it actually applied the
broader Seventh Circuit standard because the Court did not pay heed to the third element of the
Third Circuit’s Cattier effects test

—

that the defendant expressly aimed its tortious conduct at the

forum such that the forum can be said to the focal point of the tortious activity. Def. Br. at 6.
Again, Defendant is mistaken. The Court faithfully analyzed and applied the third element. Sec
D,E. 147 at 26-27.

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Defendant’s second argument is that the “Third District [sic) has not yet enforced a forum
selection clause against a non-signatory.” DeE Br. at 7-9. Initially, Defendant’s argument suffers
from the same ailments as the question it seeks to certify. The Court did not find it had personal
jurisdiction over Defendant by way of enforcing the forum selection clause in the employment
agreements. In short, the Court did not find personal jurisdiction through the “closely related
party” doctrine. That doctrine permits non-signatories to a contract to be bound by a contract if
they are closely related to the signatories. See D ‘Elm

i’.

Grand Qiribbean Co., Ltd., No. 09-1707,

2010 WL 1372027, at *3 (D.N.J. Mar. 30, 2010) (“In the Third Circuit, a non-signatory party may
enforce a forum selection clause in a contract if that party is a third-party beneficiary of the contract
or is closely related to the contractual relationship or dispute such that it is foreseeable that the
party will be bound.”).
Instead, the Court ruled that the forum selection clause, along with Defendant’s knowledge
of it and legal review, was a factor that contributed to the finding of personal jurisdiction. But the
Court never ruled that the forum selection clause, standing alone, subjected Defendant to the
jurisdiction of this Court. D.E. 147 at 24 (finding that “ATG knew of the Agreements, knew of
their key provisions (non-competition, non-solicitation, confidentiality, choice of law, and forum
selection), and paid for attorney review” was relevant to a finding of specific personal jurisdiction).
Two related points by Defendant reflect why this argument misses the mark.
Defendant repeatedly cites the Third Circuit’s decision in Davhoff Incorporated

i’.

First,

H.J Heinz

Company, 86 F.3d 1287 (3d Cir. 1996), for support. However, in Davhoff the Third Circuit found
that there was specific personal jurisdiction over a non-signatory to a contract,

Id. at 1287.

Defendant’s apparent confusion seems to stem from another issue decided in Davhoff— the
enforceability of an arbitration clause. In reference to the arbitration clause, Defendant is correct

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that the Third Circuit ruled that it could only be enforced against signatories to the actual
agreement. Id. at 1296. The Court found that plaintiff had not proven facts under the “closely
related party” doctrine to enforce it against non-signatories. Id. However, as to the issue of
personal jurisdiction, the Third Circuit ruled that the District Court had specific jurisdiction over
a non-signatory to a contract because (1) the claim asserted was the intentional tort of tortious
interference with contract; (2) the contracts themselves were performed in the district, and (3) the
non-signatory sent a termination letter to the district. Id. at 1301-03.
Second, and as noted, Defendant’s claim that the Court relied solely on the forum selection
clause to find personal jurisdiction is misplaced.

The Court made several additional factual

findings in support of its decision. In its moving papers, Defendant simply states that the additional
facts are “de minintis.” Def. Br. at 9. Of course, such a claim is merely conclusory. Defendant
utterly fails to conduct an analysis of the additional facts found by the Court in support of its ruling.
These facts, as discussed above, include that Defendant was competing in New Jersey with
Plaintiff and, critically, at least one of the employees hired was tasked with increasing Defendant’s
business in New Jersey.

In fact, one of the employees recruited a salesperson who formerly

represented Plaintiff The same employee hired a new salesperson to also increase business in
New Jersey.

The same employee streamlined Defendant’s sales process in New Jersey.

Defendant’s failure to address these critical factual findings, merely labeling them “de

minimis,”

does not permit the Court to adequately assess Defendant’s concerns and certainly disfavors a
finding that Defendant has met the second element.
Lastly, in support of the second element, Defendant argues that the Court has expressed
concerns regarding the correct legal standard and various judges previously presiding over this
matter have disagreed whether personal jurisdiction over Defendant exists. Id. at 9-11. Before

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being transferred to the undersigned, Judge Wigenton noted that there was no contract between
Defendant and Plaintiff Judge Wigenton then found that “as to whether there would be specific
jurisdiction over ATG, I do believe that some jurisdictional discovery would have to take place
prior to the Court being able to make a conclusive decision as it relates to jurisdiction over ATG.”
D.E. 141-4, Tr. 80:10-80:14.
First, the Court is unable to find any support for Defendant’s claim that Judge Wigenton
expressed concerns over the correct legal standard. This Court did not express such concerns in
its Opinion.

Moreover, the Court can find no disagreement with Judge Wigenton as to the

existence of personal jurisdiction over Defendant. It goes without saying, if Judge Wigenton had
conclusively found that there was no personal jurisdiction over Defendant, she would have
dismissed them from the case. She did not. Instead, she ordered jurisdictional discovery. Based
on the facts uncovered during the discovery, along with other already known facts, the Court found
that there was personal jurisdiction. The Court fails to see any disagreement with Judge Wigenton.
IV.

CONCLUSION
In sum, this Court DENIES Defendant’s motion to amend this Court’s Order and certify a

question for interlocutory appeal pursuant to 28 U.S.C.

§ 1292(b).

An appropriate order

accompanies this opinion.

Date: January 17, 2017

Q\t

/

JOHN MICHAEL %t4UEZ
UNITED STATES DIS1tICfJUDGE

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