GoEngineer v. Progression Technologies et al
Filing
38
MEMORANDUM DECISION AND ORDER granting 14 Motion to Dismiss for Lack of Jurisdiction. Signed by Judge Ted Stewart on 12/4/12 (alt)
IN THE UNITED STATES COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
GOENGINEER, INC., a Utah corporation,
Plaintiff,
MEMORANDUM DECISION AND
ORDER GRANTING DEFENDANTS’
MOTION TO DISMISS
vs.
PROGRESSION TECHNOLOGIES, INC., a
Texas corporation; and JOHN FORBES,
Case No. 2:12-CV-930 TS
Defendants.
This matter is before the Court on Defendants Progression Technologies, Inc.
(“Progression”), and John Forbes’ Motion to Dismiss for lack of personal jurisdiction. For the
reasons stated below, the Court will grant Defendants’ Motion.
I. BACKGROUND
Both Plaintiff and Defendant Progression are value-added resellers (“VARs”) of
computer-aided design products designed and developed by SolidWorks Corporation. A VAR
produces revenue both from the sale of a SolidWorks product and from obtaining software
contracts with customers. These contracts often involve annual maintenance subscriptions and
represent a predictable stream of revenue for a VAR.
1
Prior to January 1, 2011, Texas Engineering Systems LP (“TES”) was a direct competitor
of Progression in the Texas, Oklahoma, Louisiana and Arkansas (“TOLA”) region. However, on
January 1, 2011, Plaintiff acquired all of the assets of TES for approximately $3,000,000 and
assumed TES’s position as a VAR in the TOLA region.
When Plaintiff acquired TES, it decided not to keep some former TES employees,
including Cindi Demaree, a member of TES’s marketing department. While working for TES,
Ms. Demaree had access to a marketing information system called “Vertical Response” that was
used to track customer lists and marketing processes.
On March 2, 2011, Ms. Demaree used her TES credentials to access Vertical Response
and create a new campaign called “Progression.” Plaintiff alleges that Ms. Demaree used the
Progression campaign to download a complete copy of GoEngineer’s customer and prospect list
for the TOLA region. Defendants deny that Ms. Demaree downloaded this information, claiming
that the only way to access this information would be to have Vertical Response email the list to
Ms. Demaree’s TES email address, to which she no longer had access.
In May of 2011, Plaintiff became aware of the “Progression” campaign Ms. Demaree had
created in Vertical Response. On May 19, 2011, Plaintiff’s counsel sent a letter to Ms. Demaree,
informing her that any use of the allegedly downloaded customer list would be a violation of the
Utah Uniform Trade Secrets Act and would constitute intentional interference with economic
relations.1 The letter threatened an immediate lawsuit unless Ms. Demaree certified in a
1
Docket No. 24-1 Ex. B, at 1-2.
2
notarized document that she and Progression had destroyed all copies of Plaintiff’s proprietary
information.2 John Forbes, Progression’s President, was copied on this letter.3
Three letters were sent to GoEngineer in response to the letter sent by Plaintiff’s counsel.
First, Ms. Demaree sent a notarized affidavit to Plaintiff in which she stated that she “did not
download or export all (or any) of GoEngineer’s/TES customer list nor have I used any
GoEngineer/TES customer lists while working with my new employer, Progression
Technologies, Inc.”4 Second, Defendants’ counsel sent a letter to Plaintiff’s counsel stating that
Defendants did not have a GoEngineer customer list.5 Third, Mr. Forbes sent an email to Ken
Coburn, Plaintiff’s President, stating that Ms. Demaree had not downloaded Plaintiff’s customer
list, and had only accessed Vertical Response to provide a brief demonstration of the basic
features of the Vertical Response system.6 Based on the representations provided by Ms.
Demaree and Mr. Forbes, Plaintiff did not take legal action at that time.
Plaintiff alleges that during the summer of 2012, Dominic Salvo, a sales representative
for Progression, obtained an account list from Ms. Demaree. Mr. Salvo informed Mr. Forbes that
he had received the account list, and received the following text message in response: “Seek and
Id.
2
Id.
3
Id. Ex. C.
4
Id. Ex. D.
5
Id. Ex. E.
6
3
destroy!!!!!!”7 Plaintiff alleges that when Mr. Salvo began making sales calls on the list, he
repeatedly contacted active GoEngineer customers and became suspicious. Plaintiff further
alleges that when Mr. Salvo reported his discomfort with using the list he was fired by Mr.
Forbes.
After being fired, Mr. Salvo contacted Mr. Coburn and informed him that Progressive
was using a list containing many GoEngineer customers to make sales calls. Plaintiff alleges that
the account list used by Mr. Salvo was the customer and prospect list allegedly downloaded by
Ms. Demaree. Defendants claim that the list provided to Mr. Salvo was not downloaded from
Vertical Response by Ms. Demaree, but was instead a list of nonproprietary contacts and leads
obtained largely from public sources and common industry knowledge by Ms. Demaree while
she was working at TES. Ms. Demaree claims that she maintained this spreadsheet in a nonconfidential manner on a TES laptop. She further claims that TES sold her that laptop after she
left the company without requiring her to remove the spreadsheet. Plaintiff alleges that
regardless of how Ms. Demaree obtained the list, it contains confidential and proprietary
information and should not be used by Progressive.
On September 24, 2012, Mr. Forbes flew to Utah to meet with Mr. Coburn concerning
Mr. Salvo’s claims. Mr. Forbes claims that this meeting was an attempt to explain that the list
given to Mr. Salvo consisted only of non-confidential information and an attempt to prevent a
lawsuit.
Id. Ex. F.
7
4
II. DISCUSSION
Plaintiff carries the burden of establishing personal jurisdiction over Defendants.8 “‘To
obtain personal jurisdiction over a nonresident defendant in a diversity action, a plaintiff must
show that jurisdiction is legitimate under the laws of the forum state and that the exercise of
jurisdiction does not offend the due process clause of the Fourteenth Amendment.’”9 “It is
frequently helpful to undertake the due process analysis first, because any set of circumstances
that satisfies due process will also satisfy the long-arm statute.”10
To satisfy the constitutional requirement of due process there must be “minimum
contacts” between the defendant and the forum state.11 “When the evidence presented on the
motion to dismiss consists of affidavits and other written materials, the plaintiff need only make
a prima facie showing.”12 “The allegations in the complaint must be taken as true to the extent
they are uncontroverted by the defendant’s affidavits. If the parties present conflicting affidavits,
all factual disputes are resolved in the plaintiff’s favor . . . .”13
Kuenzle v. HTM Sport-Und Freizeitgeräte AG, 102 F.3d 453, 456 (10th Cir. 1996).
8
Soma Med. Int’l v. Standard Chartered Bank, 196 F.3d 1292, 1295 (10th Cir. 1999)
(quoting Far W. Capital, Inc. v. Towne, 46 F.3d 1071, 1074 (10th Cir. 1995)).
9
Sys. Designs, Inc. v. New Customware Co., 248 F. Supp. 2d 1093, 1097 (D. Utah 2003).
10
World-Wide Volkswagen Co. v. Woodson, 444 U.S. 286, 291 (1980).
11
Bell Helicopter Textron, Inc. v. Heliqwest Int’l., Ltd., 385 F.3d 1291, 1295 (10th Cir.
12
2004).
13
Kennedy v. Freeman, 919 F.2d 126, 128 (10th Cir. 1990).
5
The “minimum contacts” standard may be met by a finding of either general jurisdiction
or specific jurisdiction. When the “defendant has ‘purposely directed’ his activities at residents
of the forum,” courts in that state may exercise specific jurisdiction in cases that “arise out of or
relate to those activities.”14 In order for the Court to find specific jurisdiction, there must be
“some act by which the defendant purposefully avails of the privilege of conducting activities
within the forum State, thus invoking the benefits and protections of its laws.”15
Defendants argue that the Court lacks personal jurisdiction over them. Plaintiff does not
argue that the Court has general jurisdiction over Defendants. Therefore, the Court must
determine whether specific jurisdiction exists. As set forth above, in order for specific
jurisdiction to exist there must be “some act by which the defendant purposefully avails of the
privilege of conducting activities within the forum State, thus invoking the benefits and
protections of its laws.”16
Plaintiff argues that personal jurisdiction is derived in this case from the effects test set
out in Calder v. Jones.17 Calder involved an allegedly defamatory article written and edited in
Florida by a Florida resident, a reporter for the National Enquirer. The article, however,
concerned the California activities of a California resident, impugned the professionalism of an
entertainer whose television career was centered in California, was drawn from California
Burger King v. Rudzewicz, 471 U.S. 462, 472-73 (1985).
14
Hanson v. Denckla, 357 U.S. 235, 253 (1958) (citation omitted).
15
Id.
16
465 U.S. 783 (1984).
17
6
sources, and the brunt of the harm was suffered in California.18 Further, the defendants there
knew that the brunt of the injury would be felt in California, where the plaintiff lived and worked
and in which the National Enquirer had its largest circulation.19
In Calder, the Court found that personal jurisdiction existed in California as a result of
the ties to that state. The Court stated that “[a]n individual injured in California need not go to
Florida to seek redress from persons, who, though remaining in Florida, knowingly cause the
injury in California.”20 However, the Court also stated that “[t]he mere fact that [the defendant]
can ‘foresee’ that the article will be circulated and have an effect in [the forum state] is not
sufficient for an assertion of jurisdiction.”21
The Tenth Circuit has provided the following guidance concerning Calder:
Distilling Calder to its essence, we thus understand the Court to have found
purposeful direction there because of the presence of (a) an intentional action
(writing, editing, and publishing the article), that was (b) expressly aimed at the
forum state (the article was about a California resident and her activities in
California; likewise it was drawn from California sources and widely distributed
in that state), with (c) knowledge that the brunt of the injury would be felt in the
forum state (defendants knew [plaintiff] was in California and her career revolved
around the entertainment industry there).22
At this stage, where there is disputed evidence, the dispute is resolved in Plaintiff’s favor
and, as stated, Plaintiff must only prove a prima facie case of jurisdiction. With this standard in
Id. at 788-89.
18
Id. at 789-90.
19
Id. at 790.
20
Id. at 789.
21
22
Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1072 (10th Cir. 2008).
7
mind, the Court turns to apply the facts of this case to the Calder effects test. Under this test, in
order to have jurisdiction, the Court must find (a) an intentional action that was (b) expressly
aimed at the forum state, with (c) knowledge that the brunt of the injury would be felt in the
forum state.
Neither Defendant Forbes nor Defendant Progression have significant contacts with the
state of Utah. Defendant Progression is a Texas corporation that does no business in Utah, has
no employees in Utah, does not advertise in Utah, owns no property in Utah, and does not
otherwise conduct any business in Utah. Likewise, Defendant Forbes is a resident of Texas and
conducts no business in Utah.
The following communications were sent to Utah in response to a May 19, 2011, letter
sent by Plaintiff to Defendants threatening an immediate lawsuit: (1) Ms. Demaree sent a
notarized affidavit denying that she had downloaded the customer list; (2) Defendants’ counsel
sent a letter to Plaintiff’s counsel stating that Defendants did not have a GoEngineer customer
list; and (3) Mr. Forbes sent an email to Mr. Coburn, stating that Ms. Demaree had not
downloaded Plaintiff’s customer list. Finally, after learning that Mr. Salvo had accused
Defendants of misappropriating Plaintiff’s customer list, Mr. Forbes had a telephone
conversation with Mr. Coburn and flew to Utah to meet with Mr. Coburn in order to deny or
explain Mr. Salvo’s claims.
Plaintiff strenuously argues that since Plaintiff’s primary place of business is within Utah,
any torts committed by Defendants were expressly aimed at Utah because the harm from those
torts would be felt by Plaintiff in Utah. This argument must fail under Tenth Circuit precedent.
8
The Tenth Circuit has held that “plaintiff’s residence in the forum state, and hence suffering
harm there, does not alone establish personal jurisdiction over a defendant who has not
purposefully directed his activities at the state.”23
Our review of these post-Calder decisions indicates that the mere allegation that
an out-of-state defendant has tortiously interfered with contractual rights or has
committed other business torts that have allegedly injured a forum resident does
not necessarily establish that the defendant possesses the constitutionally required
minimum contacts. Instead, in order to resolve the jurisdictional question, a court
must undertake a particularized inquiry as to the extent to which the defendant has
purposefully availed itself of the benefits of the forum’s laws.37
In Far West Capital, the Tenth Circuit examined a case where a Utah plaintiff sued a
Nevada defendant for several business torts relating to a mineral rights lease on Nevada land.38
The plaintiff argued that personal jurisdiction over the defendant was warranted in Utah because
there was a flow of mail and telecommunications between the defendant and Utah, because the
defendant retained an agent in Utah, and because the defendant maintained an escrow account in
Utah. The Tenth Circuit rejected that argument, noting that “the focal point of this relationship
was Nevada rather than Utah. In short, there is no indication that Utah had anything but a
fortuitous role in the parties’ past dealing or would have any role in their continuing
relationship.”39 The court reasoned that the alleged tort did not have “any connection to Utah
beyond plaintiff’s corporate domicile. Although [plaintiff] argues that it suffered the financial
Shrader v. Biddinger, 633 F.3d 1235, 1245 (10th Cir. 2011).
23
37
Far W. Capital, 46 F.3d at 1079.
Id. at 1071.
38
Id. at 1080 (internal citation omitted).
39
9
effects of these alleged torts in Utah where it is incorporated, we hold that . . . the defendants’
contacts with Utah are insufficient to establish personal jurisdiction . . . .”40
In Grynberg v. Ivanhoe Energy, Inc., the Tenth Circuit further clarified its decision in Far
West Capital, holding that:
[T]he express aiming test focuses more on a defendant’s intentions—where was
the focal point of its purposive efforts—[as opposed to] . . . the consequences of
the defendant’s actions—where was the alleged harm actually felt by the plaintiff.
Although [s]ome courts have held that the expressly aimed portion of Calder is
satisfied when the defendant individually target[s] a known forum resident, [w]e
have taken a somewhat more restrictive approach, holding that the forum state
itself must be the focal point of the tort.41
Defendants’ actions in the present case were not aimed at Utah. The alleged theft of the
customer and prospects list in this case occurred in Texas. The alleged customer and prospects
list is a list of customers and prospects in the TOLA region. All of the alleged sales contacts
were made to customers in the TOLA region. All damages to Plaintiff’s business would occur in
the TOLA region, and it is there that Plaintiff would lose existing or potential customers. The
only damages that occur in Utah are flow-through financial damages to the bottom line of a
corporation headquartered in Utah, and “causing financial injury to a Utah business ‘has been
flatly rejected by the Utah courts as a basis for exercising specific personal jurisdiction.’”42
Plaintiff nevertheless argues that because Defendants sent letters and an email to Utah
denying that Ms. Demaree downloaded the database from Vertical Response, and because
Id.
40
2012 WL 2855777, at *8 (10th Cir. July 12, 2012) (internal quotations omitted).
41
Patriot Sys., Inc. v. C-Cubed Corp., 21 F. Supp. 2d 1318, 1321 (D. Utah 1998) (quoting
Harnischfeger Eng’rs, Inc. v. Uniflo Conveyor, Inc., 883 F. Supp. 608, 613 (D. Utah 1995)).
42
10
Defendant Forbes flew to Utah to explain what had occurred with Mr. Salvo, Defendants were
expressly aiming their conduct at Utah. However, these acts, like the letters and communications
in Far West Capital, do not indicate that the underlying tort was aimed at Utah. All of
Defendants’ contacts with Utah came in response to actions initiated in Utah by Plaintiff. It was
Plaintiff’s threat of litigation in a letter sent to Defendants that prompted Defendants to aim
responsive communications at Utah. The fact that these communications had any relation to
Utah is simply the fortuitous result of Plaintiff’s decision to incorporate in Utah.
Additionally, “[o]nly contacts occurring prior to the event causing the litigation may be
considered”43 These communications all occurred in an attempt to resolve the matter outside of
litigation as a result of Plaintiff’s threatened litigation. The events allegedly causing this
litigation is the theft of a customer list and Defendants subsequent use of that customer list.
Defendants’ attempts to explain the source of their information to Plaintiff are not contacts from
which this litigation arose, and cannot be sufficient to allow this Court to exercise personal
jurisdiction over Defendants.
Farmers Ins. Exch. v. Portage La Prairie Mut. Ins. Co., 907 F.2d 911, 913 (9th Cir.
1990) (citing Steel v. United States, 813 F.2d 1545, 1549 (9th Cir. 1987)); see Gen. Motors Corp.
v. Ignacio Lopez de Arriortua, 948 F. Supp. 656, 663 (E.D. Mich. 1996); Rossman v. State Farm
Mut. Auto. Ins. Co., 832 F.2d 282, 287 n.2 (4th Cir. 1987); Stein v. Horwitz, 191 F.3d 448 (4th
Cir. 1999).
43
11
III. CONCLUSION
Based on the foregoing, it is therefore
ORDERED that Defendants’ Motion to Dismiss (Docket No. 14) is GRANTED.
Plaintiff’s Complaint is DISMISSED without prejudice to Plaintiff bringing its claims in a court
with proper jurisdiction.
The Clerk of the Court is directed to close this case forthwith.
DATED December 4, 2012.
BY THE COURT:
_____________________________________
TED STEWART
United States District Judge
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