Summary
striking only the inadmissible portions of an affidavit
Summary of this case from Vraniskoska v. Franciscan Cmtys., Inc.Opinion
CAUSE NO. 1:02-CV-332
March 28, 2003
MEMORANDUM OF DECISION AND ORDER
I. INTRODUCTION
Before the Court is the plaintiff Owner Operator Resources, Inc.'s ("Resources") February 14, 2003, motion for leave to conduct jurisdictional discovery to determine whether personal jurisdiction exists over defendant Employer's Choice Plus, Inc. ("ECP"). In support of its motion, Resources submitted the affidavits of Wayne Wickard ("Wickard") ("Wickard Aff at ___") and Mort Adams ("Adams") ("Adams Aff. ¶ ___") and other evidence.
The other defendant in this case, Doug Maag ("Maag"), has waived any objection he may have to this Court's exercise of personal jurisdiction over him. See Fed.R.Civ.P. 12(h)(1). We will refer to Maag and ECP collectively as the "Defendants."
Because it makes more sense to do so, we will cite to Wickard's affidavit by page rather than by paragraph.
Because these affidavits were not notarized and for other reasons, ECP filed a motion to strike both affidavits. Both the motion for leave to conduct jurisdictional discovery and the motion to strike have been fully briefed and are ripe for ruling.
ECP submitted the affidavit of John Cacaro ("Cacaro") ("Cacaro Aff. ¶ ___") in support of its response brief.
For the following reasons, ECP's motion to strike will be GRANTED in part and DENIED in part, and Resources's motion for leave to conduct jurisdictional discovery will be GRANTED.
II. THE MOTION TO STRIKE
First, ECP argues that because Wickard's and Adams's affidavits lack a notary's jurat, they should be stricken. We can quickly dispose of this argument, however, because 28 U.S.C. § 1746 permits a declaration made under the "penalty of perjury" to be used in lieu of an oath sworn before notary public. See Paters v. United States, 159 F.3d 1043, 1052 n. 5 (7th Cir. 1998); Pfeil v. Rogers, 757 F.2d 850 (7th Cir. 1985) ("the absence of the formal requirements of a jurat in a sworn affidavit does not invalidate the statements . . . so long as the documents comply with 28 U.S.C. § 1746"); also LeBoeuf Lamb, Greene MacRae, L.L.P. v. Horsham, 185 F.3d 61, 65 (2d Cir. 1999) (§ 1746 only calls for language which "substantially" complies with its statutory requirements). Here, both Wickard's and Adams's affidavits both state that "I affirm, under the penalties of perjury, that the above and foregoing representations are true," which is sufficient under 28 U.S.C. § 1746. (Wickard Aff. at 5; Adams Aff. at 2) (emphasis added).
ECP next argues that Wickard's entire affidavit should be stricken because it contains five (5) statements purportedly not based upon his personal knowledge. See Fed.R.Evid. 602. Resources argues that while some of the statements contained in Wickard's affidavit might "be conclusory, any such statement is simply a . . . reasonable inference based upon other facts set forth in the affidavit." (Resources' Resp. to M. to Strike.)
ECP raises no such argument about Adams's affidavit. Nevertheless, ECP argues that the following passages in Wickard's affidavit should be stricken: (1) "[Fox and Bingham] worked for the Defendant, [ECP]" (Wickard Aff. at 3, second paragraph); (2) "Maag set up [ECP] to compete directly with Plaintiff . . ." ( id. at 3, fifth paragraph); (3) "Page 2 of 3 is a portion of the form [i.e., the Ohio Articles of Incorporation] that is optional and very rarely used" ( id. at 3, sixth paragraph); (4) "Maag set up his own company, i.e. [ECP], to compete against Plaintiff" ( id. at 4, second line); and (5) "Fox and [Bingham] were aided by Defendant Maag in misappropriating trade secrets from Plaintiff and worked for Maag and/or his corporation, [ECP], all for economic gain and in violation of the Trade Secrets Act." ( Id. at 4, first full paragraph).
While "personal knowledge" includes inferences and opinions, those inferences and opinions cannot be "flights of fancy, speculations, hunches, intuitions, or rumors about matters remote from . . . experience;" rather, they must be "grounded in observation or other first-hand personal experience." Visser v. Packer Eng'g Assoc., Inc., 924 F.2d 655, 659 (7th Cir. 1991); E.E.O.C. v. Admiral Maintenance Service, L.P., 174 F.R.D. 643, 647 (N.D. Ill. 1997); Mathis v. Pete Georges Chevrolet, Inc., 1998 WL 708806, *10 (N.D. Ill. Sept. 30, 1998).
Here, we cannot say that the five statements identified by ECP are "grounded in" Wickard's first-hand personal experience. In two of the five statements, Wickard testifies that Tom Fox ("Fox") and Matt Bingham ("Bingham") worked for ECP, however, whether those individuals (and Maag) were actually agents for ECP is apparently the very issue on which Resources wants to conduct discovery. Obviously, if Resources lacks sufficient knowledge as to whether these individuals are agents for ECP, such statements by its president cannot be based on his personal knowledge or first-hand experience, but rather represent inadmissible conjecture. Stagman v. Ryan, 176 F.3d 986, 995 (7th Cir. 1999) ("statements outside the affiant's personal knowledge or statements that are the result of speculation or conjecture or [are] merely conclusory" are inadmissible). Moreover, in two other statements Wickard testifies that Maag set up ECP to compete with Resources, yet he provides no indication how he knows this to be the case, based on either observation or first-hand personal experience. Finally, in the fifth statement identified, Wickard notes the second page of Ohio's Articles of Incorporation form is optional and only rarely used, yet he once again provides no explanation how he knows this to be true. Moreover, because this statement is simply irrelevant to the issues here, it can simply be ignored. See Packman v. Chicago Tribune Co., 267 F.3d 628, 645 (7th Cir. 2001) (district court may ignore irrelevant evidence in affidavit).
Further, while Resources claims that these five statements are reasonable inferences "based upon other facts set forth in the affidavit," it does not point to any of those "other facts" to trace the inferential path of its reasoning, or respond to ECP's specific objections. Thus, in reviewing Wickard's affidavit, we conclude that the five statements identified by ECP are not based upon his personal knowledge and should be stricken. However, we will not strike Wickard's entire affidavit because while the Court must strike inadmissible portions, it is free to consider the rest, particularly where, as here, the inadmissible evidence is not so interwoven into the affidavit as to make it impracticable to separate them. Pashoian v. GTE Directories, 208 F. Supp.2d 1293, 1297 (M.D. Fla. 2002); Gonzales v. North Tp. of Lake County, 800 F. Supp. 676, 680 (N.D. Ind. 1992), rev'd on other grounds, 4 F.3d 1412 (7th Cir. 1993).
Accordingly, we will grant ECP's motion to strike the five specifically identified statements in Wickard's affidavit discussed supra, but will otherwise deny it.
III. THE PROCEDURAL AND FACTUAL BACKGROUND
Resources originally filed this case in the Stuben County, Indiana Superior Court, and the Defendants removed it to this Court on October 17, 2002. Subsequently, on December 2, 2002, ECP filed a motion to dismiss for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2), and the instant motion followed.
To somewhat oversimplify, from January 2000 to December 2001, Maag worked for Resources as an independent contractor, and learned several of Resources trade secrets. (Wickard Aff. at 1-2.) However, Resources claims that while in its employment, Maag solicited various individuals, including Adams, Bingham, and Fox, to pretend that they intended to become independent contractors for Resources, and had them attend seminars on October 4 and November 5, 2001, during which Resources taught them its trade secrets. (Compl. ¶ 8; Wickard Aff at 2-3.)
Resources is a so-called Professional Employer Organization (a "PEO") that provides human resource and employer risk advice to various businesses.
However, Resources claims that during this time Maag was actually working for ECP, which he and John Cacaro ("Cacaro") incorporated on October 25, 2001, and that Fox, Bingham, and Adams were all working for ECP, at least through Maag. ( See Compl. ¶¶ 10-11; Adams Aff. ¶¶ 9-10; ECP's Articles of Incorporation.)
Also on October 25, 2001, apparently Maag and Cacaro met with Fox and Adams to discuss operating ECP as a PEO, to offer similar, if not identical, services as Resources. (Adams Aff. ¶¶ 4, 7) (noting that Adams understood ECP to be in "direct competition" with Resources). During a subsequent meeting on November 13, 2001, Maag and Cacaro approached Adams about becoming an ECP shareholder.
Moreover, during this time, apparently Bingham and Fox frequently called and faxed Resources at its Indiana office, and Bingham tried to get Resources to advance monies to Fox for sales. (Wickard Aff. at 3.)
Nevertheless, in December, Adams backed out of ECP's invitation to buy its stock, and apparently distanced himself from the entire venture. (Adams Aff. ¶¶ 5-6, 10.) Later that month, Adams met with Wickard and told him that Maag had sold at least two accounts for ECP, and apparently even used Resources's computerized price quotation form to solicit business from a company called Golden Hawk Transportation on ECP's behalf. (Wickard Aff. ¶¶ 10, 13, Ex. 5; Adams Aff. ¶ 9.) Subsequently, Wickard confronted Maag on December 31, 2001, and Maag admitted selling essentially the same products as Resources. (Wickard Aff. ¶ 10.) On the same day, Wickard sent Maag a letter terminating his employment. (Wickard Aff., Ex. 2.)
Cacaro, ECP's current sole shareholder, claims that Adams, Fox, Bingham, and Maag, never worked for ECP, were never authorized to make contacts in Indiana on its behalf, and "to the best of [his] knowledge" were not acting on its behalf when they contacted Resources. ( See Cacaro Aff ¶¶ 5-6.)
IV. DISCUSSION
A. Personal Jurisdiction Principles
A federal district Court exercising diversity jurisdiction has personal jurisdiction over a nonresident defendant "only if a court of the state in which it sits would have such jurisdiction." Steel Warehouse of Wisconsin, Inc. v. Leach, 154 F.3d 712, 714 (7th Cir. 1998); Wilson v. Humphreys Ltd., 916 F.2d 1239, 1243 (7th Cir. 1990); Anderson v. Sportmart, Inc., 179 F.R.D. 236, 238 (N.D. Ind. 1998) (Cosbey, Magis. J.). Indiana follows a two-step approach to personal jurisdiction, requiring first a look to whether ECP's contacts fall within one of the enumerated acts of the state's long-arm statute, Ind. Tr. R. 4.4(A). If those contacts fall within the statute, we must next determine whether they are sufficient to satisfy federal due process concerns. International Medical Group, Inc. v. American Arbitration Assoc., Inc., 312 F.3d 833, 845 (7th Cir. 2002); Williams v. REP Corp., 302 F.3d 660, 666 (7th Cir. 2002); Anthem, 730 N.E.2d at 1232.
The Indiana Supreme Court counsels that although Rule 4.4(A) is technically a trial rule, it performs the same function as a long-arm statute. Anthem Ins. Cos., Inc. v. Tenet Healthcare Corp., 730 N.E.2d 1227, 1231 n. 6 (Ind. 2000).
Indiana Trial Rule 4.4(A) provides, in relevant part,
Any person or organization that is a nonresident of this state . . . submits to the jurisdiction of the courts of this state as to any action arising from the following acts committed by him or her or his or her agent: . . . (2) causing personal injury or property damage by an act or omission done within this state[.]
Ind. Tr. R. 4.4(A)(2).
Due process considerations require a nonresident defendant to have "minimum contacts with [the forum] 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 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). The Supreme Court has interpreted this as creating a two-part test, focusing first on whether ECP's contacts with Indiana are sufficient to establish that it could "reasonably anticipate being haled into court there," and second on whether the exercise of personal jurisdiction would offend "traditional notions of fair play and substantial justice" by weighing a variety of interests. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 476 (1985).
The substance of the "minimum contacts" analysis depends on whether Resources seeks to assert "general" or "specific" personal jurisdiction over ECP. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 nn. 8-9 (1984). Since Resources's briefs do not indicate whether it believes the Court has general or specific personal jurisdiction, we will set out the standard for both.
1. General personal jurisdiction
When a defendant's contacts with the forum state are unrelated to the subject matter of the lawsuit, general personal jurisdiction may be established if its contacts are so continuous and systematic that the defendant could reasonably foresee being haled into court in that state for any matter. Id. at 414-15; International Medical, 312 F.3d at 846; Anthem, 730 N.E.2d at 1234. Courts have identified a variety of factors to consider in making this determination including the volume of the corporation's business in the state, whether the corporation maintains an office in the state, whether the corporation sends agents into the state to conduct business or advertises and solicits business in the state. Helicopteros, 466 U.S. at 11-42; Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 445-46 (1952); Anderson, 179 F.R.D. at 240-41. "No one factor is dispositive, but `[i]n practice, the standard for establishing general jurisdiction is very high.'" Anderson, 179 F.R.D. at 241 (quoting Endermatic, Inc. v. Tarmac Corp., 815 F. Supp. 290, 293 (S.D. Ind. 1993)).
2. Specific personal jurisdiction
Unlike general personal jurisdiction, specific personal jurisdiction only exists when a defendant's contacts with the state are directly related to the subject matter of the lawsuit. Helicopteros, 466 U.S. at 414; International Medical, 312 F.3d at 846; Anthem, 730 N.E.2d at 1234. In order to establish specific personal jurisdiction over a defendant, it must have purposefully established contact with the forum state and the basis for the lawsuit must arise out of those contacts. See Burger King, 471 U.S. at 472.
Contacts are "acts physically performed in the forum state and acts performed outside the forum state that have an effect within the forum." Anthem, 730 N.E.2d at 1234 (quoting 16 MOORE'S FEDERAL PRACTICE AND PROCEDURE § 108.42[2][a] (Matthew Bender 3d ed. 2000)). The Supreme Court has held that a single contact with a forum state may be enough to establish specific personal jurisdiction, so long as it creates a "substantial connection" with the forum state and the suit is based on that connection. McGee v. International Life Ins. Co., 335 U.S. 220, 223 (1957); Snyder v. Smith, 736 F.2d 409, 416 (7th Cir. 1984) (single act maybe sufficient to confer jurisdiction as long as the cause of action arises from that act). However, the act must be purposeful, not a "random or fortuitous or attenuated contact, or . . . the unilateral activity of another party or a third person." Burger King, 471 U.S. at 475 (internal quotations and citations omitted); Federated Rural Elec. Ins. Corp. v. Inland Power Light Co., 18 F.3d 389, 394 (7th Cir. 1994) ("A defendant must have derived some benefit from the state to justify being forced to litigate in what is likely to be an inconvenient forum").
B. The Prima Facie Case for Jurisdictional Discovery
"It is well established that a federal district court has the power to require a defendant to respond to discovery requests relevant to his or her motion to dismiss for lack of personal jurisdiction." Anderson, 179 F.R.D. at 241 (quoting Ellis v. Fortune Seas, Ltd., 175 F.R.D. 308, 311 (S.D. Ind. 1997)). In fact, a district court risks abusing its discretion by not allowing some limited discovery into the personal jurisdiction issue. Id. (citing Wyatt v. Kaplan, 686 F.2d 276, 283 (5th Cir. 1982)).
However, a plaintiff does not enjoy an automatic right to discovery pertaining to personal jurisdiction in every case. Id. At a minimum, a plaintiff must establish a colorable or prima facie showing, with some competent evidence, that personal jurisdiction might exist before discovery should be permitted. Central States, Southeast and Southwest Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 946 (7th Cir. 2000); Anderson, 179 F.R.D. at 241; Ellis, 175 F.R.D. at 312. "For example, a plaintiff is entitled to jurisdictional discovery if he or she can show that the factual record is at least ambiguous or unclear on the jurisdictional issue." Anderson, 179 F.R.D. at 241-42 (citing Hansen v. Neumueller GmbH, 163 F.R.D. 471, 474 (D. Del. 1995); see also Renner v. Lanard Toys, Ltd., 33 F.3d 277, 283 (3d Cir. 1994). "This standard is quite low, but a plaintiffs discovery request will nevertheless be denied if it is only based upon `bare,' `attenuated,' or `unsupported' assertions of personal jurisdiction, or when a plaintiffs claim appears to be clearly frivolous." Anderson, 179 F.R.D. at 242 (citing Ellis, 175 F.R.D. at 312).
With these principles in mind, we now turn to the question of whether Resources has provided the Court with enough evidence to establish the requisite prima facie showing that this Court has personal jurisdiction over ECP.
C. Analysis
1. Resources has made a prima facie showing under the Indiana long-arm statute
The Court's first task is to determine whether Resources has made a colorable claim that the ECP's contacts fall within Indiana's long-arm statute. Neither party fully addresses whether Resources can make out a prima facie showing that jurisdiction might exist under Indiana's longarm statute, nevertheless, because the standard for this showing is "quite low," we will give Resources every inference.
Accordingly, if Resources can demonstrate that either Maag, Fox, Bingham, or Adams were agents for ECP, arguably it has satisfied the requirements of Indiana Tr. R. 4.4(A)(2), because those individuals allegedly misappropriated Resources's trade secrets in Indiana. See Ind. Code 24-2-3-2 (defining misappropriation of trade secrets to include improper acquisition); Infinity Products, Inc. v. Quandt, 775 N.E.2d 1144, 1153 (Ind.App.Ct. 2002) (misappropriation begins at the moment property is taken and continues for as long as a person exerts unauthorized control over it). Since, as discussed in more detail below, at this point it is at least "ambiguous" or "unclear" whether those individuals were agents for ECP, Resources has made its prima facie showing that ECP's contacts might fall within Indiana's long-arm statute, and jurisdictional discovery should be allowed on this issue. Id. at 241-42.
2. Resources has not made a prima facie showing for general personal jurisdiction
However, Resources has clearly failed to make out a prima facie case for general personal jurisdiction. Indeed, Resources has not pointed to any competent evidence demonstrating that ECP has "continuous and systematic business contacts" with Indiana. Helicopteros, 466 U.S. at 416. To the contrary, the record reveals that ECP does not regularly conduct business in Indiana — and in fact may never have conducted any business there: it does not maintain an office or employees in Indiana; it does not regularly send agents into Indiana to conduct business, or advertise or solicit business in Indiana, and it has no agent designated to receive service in Indiana. See Perkins, 342 U.S. at 445-446. In evaluating these factors, the Court concludes that Resources has failed to make even a prima facie showing of general personal jurisdiction over ECP. Accordingly, we will not allow Resources to conduct jurisdictional discovery on whether this Court has general personal jurisdiction over ECP.
3. Resources has made a prima facie showing for specific personal jurisdiction
Finally, Resources has established a prima facie showing that specific personal jurisdiction might exist. Indeed, Maag, Adams, Fox, and Bingham all entered Indiana several times to attend training sessions where they learned Resources's trade secrets. Further Fox and Bingham apparently contacted Resources in Indiana by phone and fax for advice regarding those trade secrets, and Maag allegedly even used Resources's price quotation form to solicit clients, ostensibly for ECP.
Certainly, the actions of Maag, Adams, Fox, and Bingham created a "substantial connection" to Indiana, and were sufficiently related to the current action that these individuals could all "anticipate being haled into court" there. See Burger King, 471 U.S. at 462. Indeed, based on the record as it stands, it appears that most of these individuals entered Indiana arguably with the sole intention of acquiring Resources's trade secrets, which would potentially expose them to liability under Indiana's Trade Secrets Act. IND. CODE § 24-2-3-2, et seq.
Obviously whether any of these individuals are liable under that Act remains an issue to be resolved on another day.
However, the issue then becomes whether these individuals were ECP's agents, since under Indiana law, the employer's respondeat superior liability arises from its employees' wrongful acts committed within the scope of their employment. Sword v. NKC Hospitals, Inc., 714 N.E.2d 142, 148 (Ind. 1999).
On this score, the parties have submitted competing evidence, all of which demonstrates that, on this record at least, it is ambiguous or unclear whether these individuals were in fact agents of ECP. Although Cacaro testifies that Adams, Fox, Bingham, and Maag, never worked for ECP, were never authorized to make contacts in Indiana on its behalf and "to the best of [his] knowledge" were not acting on its behalf when they contacted Resources, ( see Cacaro Aff. ¶¶ 5-6), Resources has presented competent evidence indicating that Maag may have actually been an agent for ECP. Indeed, apparently Maag solicited, and sold, accounts on behalf of ECP using form documents prepared by Resources. Furthermore, Maag clearly had at least some agency relationship with ECP since he was one of its incorporators and is listed as its statutory agent in its Articles of Incorporation. However, what remains unclear is the scope of his agency relationship with ECP. After all, it is at least possible that his agency extended so far as to allow him to recruit others, like Fox, Adams, and Bingham to serve as agents for ECP as well.
Such conflicting evidence, and the ambiguity regarding the scope of Maag's agency relationship with ECP, leads to the conclusion that Resources is entitled to probe into ECP's knowledge or expectations of its relationships with Maag, Adams, Fox, and/or Bingham, since this discovery may shed some light on whether ECP "`purposefully avail[ed] itself of the [benefits] of conducting activities within the [Indiana].'" Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 620 (1992). At bottom, Resources's theory of specific personal jurisdiction over ECP is not frivolous, but in fact has at least some support in the record. Accordingly, its motion for leave to conduct limited jurisdictional discovery will be granted.
4. Scope of Discovery
Having determined that Resources is entitled to conduct discovery on the issues of specific personal jurisdiction and the Indiana long-arm statute, we must now adduce the proper scope of discovery. Although Resources generally states that it wants to propound interrogatories, have document production, and conduct depositions about personal jurisdiction, we recognize that jurisdictional discovery "should not be expansive since it does not go to the merits of the case, yet it should be broad enough to allow [Resources] to pursue [its specific personal] jurisdiction theor[y] until [it] is conclusively ruled out." Anderson, 179 F.R.D. at 244 (collecting cases).
In assessing the proper scope of discovery here, the Court concludes that Resources should be permitted to conduct a Rule 30(b)(6) deposition of ECP and to depose Fox, Bingham, and/or Adams regarding the possible existence of an agency relationship with ECP and their contacts with Resources in Indiana. See cf., Nissan Fire Marine Ins. Co., Ltd. v. Fortress Re, Inc., 2002 WL 1870084, *6 (S.D.N.Y. Aug. 14, 2002) (noting that a Rule 30(b)(6) deposition or other depositions are appropriate methods for obtaining jurisdictional discovery); Marra v. Papandreou, 33 F. Supp.2d 17, 18 (D.D.C. 1999) (permitting jurisdictionally limited Rule 30(b)(6) depositions).
CONCLUSION
For the foregoing reasons, ECP's motion to strike is GRANTED as to the five specific statements in Wickard's affidavit, but is otherwise DENIED. Resources's motion to conduct jurisdictional discovery regarding specific jurisdiction and the Indiana long-arm statute is GRANTED, and it will be permitted to take a Rule 30(b)(6) deposition of ECP, and to depose Maag, Fox, Bingham, and/or Adams regarding the possible existence of an agency relationship and their contacts with Resources in Indiana.
SO ORDERED.