Opinion
No. X10 NNH-CV-05-4016768S CLD
April 20, 2006
MEMORANDUM OF DECISION
All three defendants have filed a motion to dismiss challenging personal jurisdiction over them. The two individual defendants, Richard Nicholson ("Nicholson") and John Kinsey ("Kinsey") are nonresidents and the third defendant, IDC Research, Inc. ("IDC") is a foreign corporation. It is the defendants' positions that the extent and nature of their respective contacts with Connecticut do not justify this court exercising personal jurisdiction over them.
The plaintiff is a corporation which has its principal place of business in Stamford, Connecticut. Plaintiff employed Nicholson and Kinsey to work in a division of its company, its Energy Information Strategies group which provides intelligence to companies in the energy industry. Nicholson was vice president and director of this group within the plaintiff until December 2004 when he left the plaintiff and went to work for the defendant corporation IDC. He is currently employed there as vice president of their newly created Energy Insights company which directly competes with the plaintiff in the market of intelligence for companies in the energy business. Kinsey was employed as a sales account executive by the plaintiff in the same Energy Information Strategies group until he left in February 2005 and joined defendant IDC. He now works for Energy Insights at IDC as a sales person.
Plaintiff claims that these individual defendants have violated their respective covenants not to compete and also violated fiduciary duties owed the plaintiff. Plaintiff also claims that they, together with IDC have misappropriated plaintiff's trade secret and proprietary information, that information includes customer list, substantive information in the energy intelligence field that is proprietary and confidential to the plaintiff, and, interfered with plaintiff's relationship with its customers. The plaintiff seeks both legal and equitable relief in its multiple count complaint against the defendants.
"A defendant may contest the personal jurisdiction of the court even after having entered a general appearance, but must do so by filing a motion to dismiss within thirty days of the filing of an appearance." (Internal quotation marks omitted.) Brunswick v. Inland Wetlands Commission, 222 Conn. 541, 551, 610 A.2d 1260 (1992). The motion to dismiss has been filed in a timely manner.
"[I]n ruling upon whether a complaint survives a motion to dismiss, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader." (Internal quotation marks omitted.) Lawrence Brunoli, Inc. v. Branford, 247 Conn. 407, 410-11, 722 A.2d 271 (1999). "The motion to dismiss . . . admits all facts which are well pleaded, invokes the existing record and must be decided upon that alone . . . Where, however . . . the motion is accompanied by supporting affidavits containing undisputed facts, the court may look to their content for determination of the jurisdictional issue and need not conclusively presume the validity of the allegations of the complaint." (Citation omitted; internal quotation marks omitted.) Barde v. Board of Trustees, 207 Conn. 59, 62, 539 A.2d 1000 (1988); Shay v. Rossi, 253 Conn. 134, 140, 749 A.2d 1147 (2000).
An examination of personal jurisdiction requires a two-fold inquiry. "When a defendant files a motion to dismiss challenging the court's jurisdiction, a two part inquiry is required. The trial court must first "decide whether the applicable state long-arm statute authorizes the assertion of jurisdiction over the [defendant]. If the statutory requirements [are] met, its second obligation [is] then to decide whether the exercise of jurisdiction over the [defendant] would violate constitutional principles of due process." [citations omitted.] Knipple v. Viking Communications, 230 Conn. 602, 606, 674 A.2d 426 (1996). "If a challenge to the court's personal jurisdiction is raised by a defendant, either by a foreign corporation or by a nonresident individual, the plaintiff must bear the burden of proving the court's jurisdiction." Id., 607.
I. Longarm Statutes
The individual defendants assert that Connecticut's "long arm" statute, Conn. Gen. Stat. § 52-59, does not justify the exercise of jurisdiction as applied to their respective facts. The statute provides:
(a) As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident individual, foreign partnership or foreign voluntary association, or over the executor or administrator of such nonresident individual, foreign partnership or foreign voluntary association, who in person or through an agent: (1) Transacts any business within the state; (2) commits a tortious act within the state, except as to a cause of action for defamation of character arising from the act; (3) commits a tortuous act outside the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, if such person or agent (A) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in the state, or (B) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce; (4) owns, uses or possesses any real property situated within the state; or (5) uses a computer, as defined in subdivision (1) of subsection (a) of section 53-451, or a computer network, as defined in subdivision (3) of subsection (a) of said section, located within the state.
In perusing the contacts of each of the defendants with the state of Connecticut, the court will examine whether any of the bases for the exercise of jurisdiction applies.
Richard Nicholson
Nicholson, at all relevant times is a resident of Colorado. He has never lived in Connecticut. He does not now nor has he ever owned property in Connecticut. The plaintiff is a Delaware corporation with its principal place of business in Stamford, Connecticut. In 1997, Nicholson entered into employment with the plaintiff. The offer of employment, and its acceptance by Nicholson, were made through the postal mail. Pursuant to the offer of employment, Nicholson's work for the plaintiff was to be out of his "home office in the Denver area." Nicholson remained in the employ of the plaintiff until December 3, 2004. He was in Connecticut twice each year over the seven years of his employment, for the plaintiff's annual meeting and for its annual holiday party. He attended both of these events in his capacity as an employee of the plaintiff.
As a part of Nicholson's employment he had ongoing contact and correspondence with Metagroup in Connecticut through the postal mail on human resource issues, signing and completing performance evaluations, received a regular paycheck mailed from a Connecticut bank, borrowed money from his Connecticut employer by way of advances and used a corporate credit card issued by that employer. As a part of Nicholson's employment he also received options to purchase stock in Metagroup. In the execution of his job duties from Colorado, Nicholson utilized Metagroup's network and email systems maintained at their Connecticut offices.
John Kinsey
John Kinsey, at all relevant times, has been a resident of New Jersey. He did not live in Connecticut during the times at issue. In 1997, he was offered a position as District Sales Director with Metagroup, the plaintiff company with its office in Stamford, Connecticut. The offer expressly stated, "You will work from your home office in the NJ [New Jersey] area." Kinsey signed the offer of employment and mailed it back to the plaintiff in Connecticut.
Nicholson remained in the employ of the plaintiff until December 3, 2004. He was in Connecticut twice each year over the seven years of his employment, for the plaintiff's annual meeting and for its annual holiday party. He attended both of these events in his capacity as an employee of the plaintiff.
As a part of Kinsey's employment he had ongoing contact and correspondence with Metagroup in Connecticut through the postal mail on human resource issues, including signing and completing performance evaluations, received a regular paycheck mailed from a Connecticut bank, repaid some funds to Metagroup in Connecticut and used a corporate credit card issued by that employer. As a part of Kinsey's employment he also received options to purchase stock in Metagroup. In the execution of his job duties from New Jersey, Nicholson utilized Metagroup's network and e-mail systems maintained at their Connecticut offices.
Such other facts as may be contained in the affidavits from the parties will be referred to as necessary.
The court finds that both Nicholson and Kinsey have transacted business in the State of Connecticut, within the meaning of Conn. Gen. Stat. § 52-59b(a)(1). The plaintiff's end of negotiations for their respective employment all occurred in Connecticut; correspondence about the continued employment, performance, and other related human resource issues originated in Connecticut and were sent back to Connecticut from Colorado and New Jersey respectively. In Hudson Park Investors, LLC v. Anastos, 2005 WL 1093001 (Conn.Super April 8, 2005) (Rogers, J.) there were almost identical business contacts and one work-related visit. The court found those contacts were sufficient for the court to find that the defendant was transacting business in Connecticut.
In the present case, each of the individual defendants had numerous other visits to Connecticut as a part of their employment (as well as other contacts). The court rejects the notion put forth by the defendants that the visits to Connecticut for the annual meeting and the holiday party were trivial in nature and related only to social matters. Annual meetings are essential to the business operation of any corporation. Conn. Gen. Stat. § 33-695. Both of these individual defendants attended each year of their employment along with many other of plaintiff's employees. This was not a social meeting but instead a part of their respective jobs. Further, on a regular basis they each utilized the email and network system of the computers of the plaintiff; the hardware for the same is lodged in Connecticut.
Defendants argue that because the critical acts of the defendants' employment with the plaintiff were not performed in Connecticut it does not constitute transacting business in Connecticut within the meaning of Conn. Gen. Stat. § 52-59b(a)(1). This argument relies in large part on Cooper Companies, Inc. v. Woodbridge Associates Ltd. Partnership, 1992 Conn.Super. LEXIS 1499 (May 19, 1992) (Hodgson, J.) ( 6 Conn. L. Rptr. 415), in which the defendants successfully challenged in personam jurisdiction. That case is readily distinguishable from the instant matter on the facts.
In Cooper Companies the defendants were individual nonresidents that were sued by nonresident plaintiffs over a plan to develop a shopping center in Connecticut. In the Cooper Companies case the court looked at the totality of the acts in Connecticut and determined that the limited contacts with Connecticut had nothing to do with the matters over which the litigation ensued between the parties. In not finding in personam jurisdiction, the court noted that all of the relevant negotiations between the parties which were the heart of the partnership agreement or joint venture agreement from which the allegations of the various counts rose occurred in New York among parties, none of whom were Connecticut residents. Id., *8 *15.
In contrast, in the present case, one half of all the employment negotiations occurred in Connecticut. Further, the defendants, as a part of their employment, utilized plaintiff's computer operation in Connecticut and received all their remuneration from Connecticut. The transaction which is the subject of this litigation is the contractual employment agreement.
Also illustrative is the decision of the court in Pro Performance Corporate Services v. Goldman, 47 Conn.Sup. 476, 804 A.2d 248 (2002) ( 32 Conn. L. Rptr. 406). In that case, the defendant initiated contact though the mails with a Connecticut plaintiff to purchase tickets for a Super Bowl game (outside the state). The court found that this purposeful contact for a business transaction satisfied the requirements of 52-59b(a)(1) and constituted a single, purposeful transaction within the state of Connecticut. In the present case, Kinsey initiated the contact with Metagroup for employment, knowledgeable that he was contracting with it at its Connecticut office. Nicholson did not initiate the contact for his employment but engaged in negotiations knowing that they were a Connecticut firm. In the claims against Nicholson and Kinsey for breach of contract and misappropriation of confidential information, Metagroup's claim is that the information that each had of their operations and work product which each defendant gained specifically through employment with the plaintiff is the valuable information and contract breach that was brought to IDC. Much of that information flowed through the computer and email system of the plaintiff housed in Connecticut. The employment agreements which are at the center of this litigation were performed in Connecticut as well as in New Jersey and Colorado, respectively. Given that a single transaction sufficed to satisfy the longarm statute in Goldman than afortiori the aggregate contacts of the individual defendants are sufficient to satisfy the statute in the present case.
After considering all of the contacts each of the individual defendants here have with the plaintiff in furtherance of the agreement of employment, the court finds that both Kinsey and Nicholson were transacting business within the State of Connecticut.
Although not necessary to its decision, the court notes that the individual defendants' utilization of the plaintiff's computer network provides an independent basis for personal jurisdiction under the provision of the longarm statute recently amended to include, "uses a computer, as defined in subdivision (1) of subsection (a) of section 53-451, or a computer network, as defined in subdivision (3) of subsection (a) of said section, located within the state." General Statutes § 53-451(a)(3) states: "`Computer network' means a set of related, remotely connected devices and any communications facilities including more than one computer with the capability to transmit data among them through the communications facilities." While the plaintiff need only prove jurisdiction based upon one provision of the longarm statute, jurisdiction lies under this provision as well.
IDC Research, Inc.
IDC Research, Inc. (IDC) is a Delaware corporation. Its principal place of business is in Framingham, Massachusetts. It has no offices in Connecticut. IDC is a direct competitor of the plaintiff. It provides intelligence for the energy industry including predictions and analyses of vital indicators in the field, areas that the plaintiff has historically as well as presently operates in. IDC employs over 775 analysts in 50 countries around the world. IDC derives approximately 2% of its world wide revenues from Connecticut yearly. IDC maintains an internet web site that is computer accessible from any remote location, including Connecticut, on a full-time, 24 hour a day, seven day a week basis. Such a user is able to purchase IDC goods and services on-line through its internet site.
The plaintiff asserts that the court has jurisdiction over the defendant IDC pursuant to the longarm statute applicable to foreign corporations under the following provisions of Gem Stat. § 33-929:
(e) Every foreign corporation which transacts business in this state in violation of section 33-290, shall be subject to suit in this state upon any cause of action arising out of such business. (f) Every foreign corporation shall be subject to suit in this state, by a resident of this state or by a person having a usual place of business in this state, whether or not such foreign corporation is transacting or has transacted business in this state and whether or not it is engaged exclusively in the interstate or foreign commerce, on any cause of action arising as follows (1) out of any business in this state or to be performed in this state . . .
The question for the court is whether the maintenance of a webpage accessible to Connecticut customers to purchase items, coupled with 2% of IDC's worldwide sales originating in Connecticut is sufficient for the court to determine that the longarm statute applies to IDC as a company that transacts business in the State of Connecticut. The items for purchase through the website include writings of Nicholson, forecast summaries of likely energy market conditions and other kinds of products that the plaintiff alleges in its complaint were misappropriated from it by IDC when it hired Nicholson and Kinsey away from Metagroup.
This jurisdiction assertion through the internet is distinguishable from other cases where the business transacted was merely passive advertisement. The defendant's website is interactive: the defendant reaches a plaintiff purchaser who actively engages in a transaction from Connecticut to purchase items from the IDC website that has reached them in their living room or office in Connecticut. The store has placed itself in Connecticut and accepted payment from a credit card transaction which has originated in Connecticut, for the purchase of goods offered by defendant IDC in their online store. See Mashantucket Pequot Tribe v. Redican, 309 F.Sup. 309 (D.Conn. 2004) for an excellent analysis and discussion of development of the law regarding the exercise of jurisdiction over companies actively doing business in Connecticut over an internet website. Further, the defendant IDC was doing business in Connecticut at the salient times involved in this case with 2% of its worldwide sales in Connecticut. Of course, the court does not know the magnitude in dollars for IDC of 2% of its sales.
See generally Centennial Helicopter, Inc. v. Sterling Corp., 2005 Ct.Sup. 14945, 40 CLR 342, and cases discussed therein.
The court notes, however, by way of example, that if IDC asserted it did business only nationally, in the 50 states of the union, then arguably for Connecticut to represent 2% of its sales would suggest that, on average, Connecticut has no more and no less sales than the other 49 states. IDC, though, does business not only throughout the United States, but also throughout the world. In its website, captured on the single day of September 21, 2005, it advertised conference events that it was involved in Australia, Taiwan, the UK, Denmark, Norway, The Russian Federation and the United States. Its website had links to every single region of the world. With that kind of reach, 2% of sales, which are not insignificant in and of itself, are by syllogism a larger piece of a worldwide pie than a national pie. All of the products advertised on the website, from which the Connecticut sales are procured, can be purchased any time of any day by a Connecticut resident by placing the resident's credit card information in the stream of commerce when undertaking the purchase from a computer located in Connecticut, connected from Connecticut to the defendant IDC's out of state address over the internet.
Therefore, this case is distinguishable from Fallon v. The Mattworks, 2005 WL 89121 (Conn.Super. March 14, 2005) (Sheedy, J.), where there was nothing more than mere speculation that a nonresident defendant had sold its products over the internet to Connecticut residents. "Placing its product in the stream of commerce via the Internet without the reasonable expectation that product would be used here does not confer personal jurisdiction. "If jurisdiction were to be based upon a defendant's mere presence on the Internet, this would lead to a defendant's being subjected to jurisdiction on a worldwide basis and would eviscerate the personal jurisdiction requirements as they currently exist." (Internal quotation marks omitted.) Fallon v. The Matworks, supra, 2005 WL 89121 at *5, quoting Edberg v. Neogen Corp., 17 F.Sup.2d 104, 115 (D.Conn. 1998).
The situation in Fallon stands in sharp contrast to the present case, where the defendant IDC knew that its goods were destined for Connecticut among other places, when it advertised them for sale in Connecticut. "In Shaw v. American Cyanamid Co., 534 F.Sup. 527 (D.Conn. 1982), the court reviewed a number of cases decided under World-Wide Volkswagen and concluded jurisdiction is supported only where the record demonstrated the defendant knew its goods would enter the forum state either in the specific instance giving rise to the litigation or on a regular enough basis that it `has clear notice that it is subject to suit there . . .'" (Internal citation and quotations marks omitted.) Simeone v. Federal Press Co., 40 Conn.Sup. 173, 178 (1984). The court in Simeone found it persuasive that the defendant "engaged in affirmative conduct establishing the requisite minimum contacts necessary to support the statutory reach" and that there was no question the defendant knew its press was destined for Connecticut. Id., at 178-79.
Finally, it is plain to the court that the litigation in this case is related to the bases on which the court has found jurisdiction over these defendants.
[A]ny cause of action arising out of [the transaction of] such business requires some showing that the present litigation bears some connection with the business conducted by the foreign corporation in this state. Apolinario v. Avco Corporation, (U.S.D.Ct., D.Conn.Civ. No. H-81-133) (1982); Shaw v. American Cyanamid Co., 534 F.Sup. 527, 530 (D.Conn. 1982); Bross Utilities Service Corporation v. Aboubshait, 489 F.Sup. 1366, 1371 (D.Conn. 1980), aff'd without opinion, 646 F.2d 559 (2d Cir. 1980); McFaddin v. National Executive Search, Inc., 354 F.Sup. 1166, 1168 (D.Conn. 1973); Electric Regulator Corporation v. Sterling Extruder Corporation, 280 F.Sup. 550, 554 (D.Conn. 1968).
(Internal quotation marks omitted.) Lombard Bros., Inc. v. General Asset Management Co., 190 Conn. 245, 252, 460 A.2d 481 (1983). The plaintiff claims that IDC created a new division of their company, Energy Insights, shortly after Nicholson and Kinsey joined them to utilize the proprietary information of the plaintiff that Nicholson and Kinsey gained through their employment with the plaintiff and that information was available for sale and sold on the internet by the defendant IDC, which had 2% of those annual worldwide sales in Connecticut. As to IDC, whether the Connecticut sales were specifically of the claimed forbidden work product of Nicholson and Kinsey would be impossible to determine at this stage. Certainly it remains available for sale on a 24/7 basis to Connecticut individuals and businesses. The court finds that this is a sufficient nexus between the internet offer to sell and the sales in Connecticut and the subject litigation to satisfy the court that IDC should have expected that if they employed Nicholson and Kinsey and offered for sale and sold their work product for Energy Insights on the internet to Connecticut buyers that they would be sued for alleged wrongful conduct therein, by the plaintiff.
II.
The inquiry does not end here. The court must now consider whether these contacts are sufficient minimum contacts to justify the exercise of jurisdiction over IDC and over Kinsey and Nicholson respectively, or, whether it would offend our notions of due process. In order for a court to exercise jurisdiction over a nonresident defendant, the court must find that the state it is in must have "certain minimum contacts with it such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). The consideration of this is largely fact dependent.
Whether sufficient minimum contacts exist for a court to have jurisdiction is clearly dependent on the facts of each particular case. "Like any standard that requires a determination of `reasonableness,' the `minimum contacts' test of International Shoe is not susceptible of mechanical application; rather, the facts of each case must be weighed to determine whether the requisite `affiliating circumstances' are present. Hanson v. Denckla, 357 U.S. 235, 246 78 S.Ct. 1228, 2 L.Ed.2d 1283] (1958)." Kulko v. California Superior Court, 436 U.S. 84, 92, 98 S.Ct. 1690, 56 L.Ed.2d 132, reh. denied, 438 U.S. 908, 98 S.Ct. 3127, 57 L.Ed.2d 1150 (1978).
Standard Tallow Corporation v. Jowdy, 190 Conn. 48, 52, 459 A 2d (1983).
It is, of course, the burden of the plaintiff to prove that this standard has been met. Id. at 51. The court must look to several factors, including the forseeability of the defendant facing litigation in Connecticut. "The foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there. See Kulko v. California Superior Court, supra, at 97-98; Shaffer v. Heitner, 433 U.S., at 216; and see id., at 217-19 (STEVENS, J., concurring in judgment)." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). In this case, the individual defendants Nicholson and Kinsey each voluntarily undertook employment with a company located in Connecticut, communicating freely with it in the course of their respective employment, as to the matters for which they were employed and as to the human resource issues, including their pay, through the mail back and forth to Connecticut; they visited Connecticut twice a year, respectively, in the course of their employment, and they utilized the plaintiff's computer network in Connecticut to accomplish the employment tasks that were essential to the business of their respective employment.
In considering the notions of due process in an economy that survives well on communication through, mail, email and computers, this court must look more broadly at the issue of whether these defendants had sufficient contacts in their transaction of business in Connecticut as a part of their employment that it would be foreseeable that they would be hailed into court in Connecticut for legal disputes over their respective employment with the plaintiff. As the Supreme Court noted in Worldwide Volkswagen, "The limits imposed on state jurisdiction by the Due Process Clause, in its role as a guarantor against inconvenient litigation, have been substantially relaxed over the years. As we noted in McGee v. International Life Ins. Co., supra, at 222-23 this trend is largely attributable to a fundamental transformation in the American economy:
Today many commercial transactions touch two or more States and may involve parties separated by the full continent. With this increasing nationalization of commerce has come a great increase in the amount of business conducted by mail across state lines. At the same time modern transportation and communication have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity.
(Internal quotation marks omitted.) Id. at 292-93.
That is exactly the situation for IDC. It finds itself doing business all over the world, including in Connecticut as a result of its world wide operation, including its internet sales. The court finds it would not be unduly burdensome or offend notions of due process for it to be sued and defend itself in Connecticut where 2% of its annual sales occur. Kinsey and Nicholson's transaction of business in Connecticut as a part of their employment as detailed above and through the plaintiff's computer system are the exact business relationships claimed violated in this litigation; they constitute sufficient minimum contacts to expect to be hailed into court in Connecticut.
The motion to dismiss is denied as to all three defendants.