Opinion
Civil No. 04-3900 ADM/AJB.
December 20, 2004
Peter M. Lancaster, Esq., Dorsey Whitney, LLP, Minneapolis, MN, argued for and on behalf of Plaintiff.
Lora Esch Mitchell, Esq., Fredrikson Byron, P.A., Minneapolis, MN, argued for and on behalf of Defendants.
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
On December 6, 2004, oral argument before the undersigned United States District Judge was heard on Missing Link Consulting, Inc. ("MLC"), Mark Johansson, Erik Cornet and Jim Herron's (collectively "Defendants") Motion to Dismiss for Lack of Jurisdiction [Docket No. 6]. In its Complaint [Docket No. 1], SoftBrands Manufacturing, Inc. ("SoftBrands" or "Plaintiff") asserts a variety of claims stemming from Defendants' alleged misappropriation of trade secrets, violation of confidentiality and invention agreements, trademark infringement, tortious interference with contract, and deceptive advertising.
Defendants claim that their respective contacts with Minnesota are insufficient to support specific jurisdiction in this forum. In the alternative, should the Court find specific jurisdiction is appropriate for some but not all Defendants, Defendants argue the entire matter should be transferred to the Western District of Texas. For the reasons set forth below, Defendants' Motion to Dismiss for Lack of Jurisdiction is denied.
II. BACKGROUND
For purposes of the instant Motion, the facts are viewed in the light most favorable to the nonmoving party. See Digi-Tel Holdings, Inc. v. Proteq Telecommunications, 89 F.3d 519, 522 (8th Cir. 1996); Hamm v. Groose, 15 F.3d 110, 112 (8th Cir. 1994).
SoftBrands, a Minnesota corporation with its principal place of business in Minneapolis, Minnesota, develops, sells and supports enterprise software systems, such as Fourth Shift® ERP, VisiBar® and VisiWatch®. Conklin Decl. [Docket No. 24] ¶ 2. The parties dispute when SoftBrands came into existence and when it became a Minnesota corporation. SoftBrands, although acknowledging it has been known by various names, claims it has always been a Minnesota corporation with its principal place of business in Minnesota. Id. MLC contends SoftBrands is a new iteration of ArtemisSoft, a Delaware Corporation with is principal place of business in New Jersey, and only relocated to Minnesota in 2001. Johansson Decl. II [Docket No. 31] ¶¶ 4, 6, 8. In 1999, SoftBrands acquired Computer Aided Business Solutions ("CABS"), a company located in Golden, Colorado. Conklin Decl. ¶ 4.
Defendants do not dispute CABS was acquired in 1999 but claim it was purchased by Fourth Shift Corporation, a Minnesota corporation with its principal place of business in Minnesota. They claim that Fourth Shift was subsequently purchased by ArtemisSoft, which did not become SoftBrands and move to Minnesota until 2001. Johansson Decl. II ¶¶ 4, 6, 8; Mitchell Aff. [Docket No. 34] ¶ 3, Ex. A.
MLC is a Texas corporation located in Austin, Texas, that provides software integration solutions to businesses. Johansson Decl. [Docket No. 11] ¶ 1. Some of these services involve the use or support of SoftBrands software. Complaint ¶¶ 33-36. MLC does not have any offices, employees or property in Minnesota. Johansson Decl. ¶ 7. MLC is not licensed to do business in Minnesota, does not have a person authorized to accept service in Minnesota and has never provided products or services to anyone in Minnesota. Id.
Johansson, who resides and works in Austin, Texas, is the founder and President of MLC. Johansson Decl. ¶ 1. Cornet and Herron currently work for MLC but reside in Covington, Louisiana and San Diego, California, respectively. Cornet Decl. [Docket No. 9] ¶ 1; Herron Decl. [Docket No. 10] ¶ 1. Prior to their involvement in MLC, all three individual Defendants worked as Senior Consultants for CABS. Johansson Decl. ¶ 2; Cornet Decl. ¶ 2; Herron Decl. ¶ 2. They continued in the same positions after CABS was purchased by SoftBrands. Johansson Decl. ¶ 4; Cornet Decl. ¶ 4; Herron Decl. ¶ 4. During the time they worked for CABS and SoftBrands, Johansson worked out of Fort Collins, Colorado; Cornet worked out of Dallas, Texas, Reading, Pennsylvania or Covington, Louisiana; and Herron worked out of San Diego, California. All three reported to and received work assignments from supervisors based in Colorado via e-mail or telephone. Johansson Decl. ¶¶ 5, 6; Cornet Decl. ¶ 5; Herron Decl. ¶ 5. In their capacities as Senior Consultants for both CABS and SoftBrands, the individual Defendants worked directly with customers to evaluate and implement software solutions and had little or no role in the development or marketing of the products. Johansson Decl. ¶ 4; Cornet Decl. ¶ 4; Herron Decl. ¶ 4.
All three individual Defendants were issued paychecks from SoftBrands' Minnesota payroll department and had their benefits administered from Minnesota. Conklin Decl. ¶ 26. They also made travel arrangements, filed customer engagement reports, obtained expense reimbursement, received additional training, attended annual "kick-off" meetings, ordered software or other materials or equipment for customers and addressed personnel issues in Minnesota or with Minnesota personnel. Conklin Decl. ¶¶ 15, 26-27, Exs. 6-8; Johansson Decl. ¶ 5; Cornet Decl. ¶ 6; Herron Decl. ¶ 5; Anderson Decl. [Docket No. 23] Exs. 24-25; McGregor Decl. [Docket No. 27] Exs. 1-3; Haffele Decl. [Docket No. 25] Exs. 1-2. They were also issued laptop computers loaded with proprietary and confidential company software by SoftBrands, although the computers were distributed and the software was loaded in Colorado. Conklin Dec. ¶ 13.
In 2000, after CABS was acquired by SoftBrands, all three individual Defendants signed confidentiality and inventions agreements explicitly governed by Minnesota law. Conklin Decl. ¶¶ 6, 8, 11, Exs. 2, 3, 5. In addition, Johansson and Herron signed Electronic Systems Policy agreements. Id. ¶¶ 5, 10, Exs. 1, 4. The Defendants each received and signed the agreements outside of Minnesota and returned them to SoftBrands via U.S. Mail. Complaint ¶ 15; Cornet Decl. ¶ 6; Herron Decl. ¶ 6.
Cornet and Herron each traveled to and worked in Minnesota for SoftBrands clients. Cornet worked for three clients located in Minnesota while Herron worked for two. Cornet Decl. ¶ 6; Herron Decl. ¶ 5. SoftBrands claims Cornet and Herron's ultimate managers were also located in Minnesota. Weidel Decl. [Docket No. 29] ¶ 2; McGregor Decl. ¶ 1. Herron admits to having "roughly 15,000 . . . SoftBrands e-mails in his possession, custody or control" and stated that producing all such e-mails referencing Minnesota "would yield several thousand e-mails." Anderson Decl. Ex. 19 at 3.
Johansson formed MLC on or about October 12, 2001 before resigning from SoftBrands on or around December 1, 2001. Johansson Decl. ¶ 7; Conklin Decl. ¶ 7; Complaint ¶ 4. Cornet and Herron resigned on April 16, 2004 and May 1, 2004 respectively and eventually joined MLC. Pl.'s Mem. of Law in Opp'n to Defs.' Mot. to Dismiss [Docket No. 22] at 3. Cornet is MLC's Executive Vice President and Herron is a consultant. Id. Herron's exit interview was held in Minnesota. Haffele Decl. ¶ 6. After resigning and joining MLC, and without disclosing that he was no longer a SoftBrands employee, Herron continued to contact SoftBrands personnel in Minnesota for assistance with its software. Homewood Decl. [Docket No. 26] ¶¶ 1-5, Exs. 1-2. After announcing his resignation to a general manager based in Minnesota, Cornet proposed SoftBrands employ him as an independent contractor. McGregor Decl. ¶¶ 3-5, Exs. 1-3; Conklin Decl. ¶¶ 19-20, Exs. 7-8. SoftBrands entered into negotiations on the issue, before the proposal was eventually abandoned. Conklin Decl. ¶¶ 19-2, Exs. 7-8; McGregor Decl. ¶ 5.
Although the parties dispute who initiated the negotiations, SoftBrands and MLC discussed an arrangement in April 2004 where SoftBrands would enter into a partnership with MLC to provide consulting services. Johansson Decl. ¶ 9; Weidel Decl. ¶ 4; Haffele Decl. Ex. 3. While the negotiations progressed to the point where two drafts of an independent contractor agreement between MLC and SoftBrands were generated, no agreement was ever reached. Johansson Decl. ¶ 2; McGregor Decl. ¶ 8, Exs. 4-5; Conklin Decl. ¶¶ 21-22, Exs. 9-10. SoftBrands alleges the negotiations stalled when MLC would not agree to confidentiality protections proposed by SoftBrands.
In August 2004, after accepting a position at MLC, Cornet e-mailed William Christianson of Turck USA, Inc. ("Turck"). Conklin Decl. Ex. 11. Turck was one of the Minnesota-based clients that Cornet had visited while working for SoftBrands. McGregor Decl. ¶ 7; Schultz Decl. ¶ 2. In addition to being a Turck employee, Christianson served as the President of the Fourth Shift International Users Group. Cornet Decl. II [Docket No. 32] ¶ 3. The parties offer no additional evidence of correspondence between Cornet or anyone else at MLC and Christianson or other Turck employees.
Finally, MLC maintains a non-interactive website, www.missinglinkconsulting.com, that is accessible to anyone with Internet access, regardless of their location. Anderson Decl. ¶¶ 1-16, Exs. 1-13. The website includes hyperlinks to SoftBrands' website and references SoftBrands' trademarked software products. Anderson Decl. Exs. 3, 9.
MLC also previously maintained a website at www.cabs2.com. Anderson Decl. Exs. 1-13.
III. DISCUSSION
A. Standard of Review
"To survive a motion to dismiss for lack of personal jurisdiction, the plaintiff need only make a prima facie showing of personal jurisdiction over the defendant." Digi-Tel Holdings, 89 F.3d at 522. In considering a motion to dismiss, the pleadings are construed in the light most favorable to the nonmoving party, and the facts alleged in the complaint must be taken as true. Hamm v. Groose, 15 F.3d at 112; Ossman v. Diana Corp., 825 F. Supp. 870, 879-80 (D. Minn. 1993). Any ambiguities concerning the sufficiency of the claims must be resolved in favor of the nonmoving party. Ossman, 825 F. Supp. at 880.Dakota Industries, Inc. v. Dakota Sportswear, Inc. 946 F.2d 1384, 1387 (8th Cir. 1991). "A motion to dismiss should be granted as a practical matter . . . only in the unusual case in which the plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief."Frey v. City of Herculaneum, 44 F.3d 667, 671 (8th Cir. 1995).
B. Personal Jurisdiction
Generally, personal jurisdiction may be properly exercised over a non-resident defendant if: (1) the exercise of jurisdiction is permitted by the forum state's long-arm statute; and (2) the exercise of jurisdiction by the courts of the forum state comports with the Due Process Clause of the United States Constitution. See Northrup King Co. v. Compania Productora Semillas Algodernas Selectas, S.A., 51 F.3d 1383, 1387 (8th Cir. 1995). However, the Minnesota Supreme Court has interpreted the state's long-arm statute to "extend the personal jurisdiction of Minnesota courts as far as the Due Process Clause of the federal constitution allows." Valspar Corp v. Lukken Color Corp. 495 N.W.2d 408, 410 (Minn. 1992). As a result, "the inquiry collapses into a single question of whether exercising personal jurisdiction comports with due process." Bell Paper Box, Inc. v. U.S. Kids, Inc., 22 F.3d 816, 818 (8th Cir. 1994).
Under the Due Process Clause, a court may exercise personal jurisdiction over a non-resident defendant having "certain minimum contacts with [the forum state] such that the maintenance of a suit does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal quotations omitted). The minimum contacts analysis is met where "the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 295 (1980). This test is satisfied if a "defendant deliberately has engaged in significant activities within a State or has created continuing obligations between himself and residents of the forum," and such actions invoke the benefits and protections of the state's laws.Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-76 (1985) (internal citations and quotation marks omitted). A non-resident defendant has "fair warning" and may be haled into the forum's court where "the defendant has purposefully directed his activities at residents of the forum, and the litigation results from the alleged injuries that arise out of or relate to those activities." Id. at 472-73 (internal citations and quotation marks omitted).
In the Eighth Circuit, courts analyze five factors to determine whether the exercise of personal jurisdiction comports with due process: (1) the nature and quality of the contacts with the forum state; (2) the quantity of contacts with the forum state; (3) the relation of the cause of action to the contacts; (4) the interest of the forum state in providing a forum for its residents; and (5) the convenience of the parties. Land-O-Nod Co. v. Bassett Furniture Indus., Inc., 708 F.2d 1338, 1340 (8th Cir. 1983). The first three factors are of primary importance and are often considered together while the last two factors are less important and non-determinative. See Digi-Tel Holdings, 89 F.3d at 523. The Eighth Circuit has also elaborated on the third factor to distinguish between specific and general jurisdiction.Burlington Indus., Inc. v. Maples Indus., Inc., 97 F.3d 1100, 1102 (8th Cir. 1996).
As the Eighth Circuit has stated that "[e]ach defendant's contacts with the forum state must be assessed individually," an independent analysis of whether personal jurisdiction is appropriate for Cornet, Herron, Johansson and MLC follows.
The circumstances surrounding Cornet and Herron's employment at SoftBrands and other contacts with Minnesota are very similar and will thus be discussed together.
Cornet and Herron argue they are not subject to personal jurisdiction in Minnesota because, at all times relevant to this suit, they lived and worked outside of Minnesota, they signed the contracts at issue outside of Minnesota, and any alleged acquisition or disclosure of proprietary or confidential information occurred outside of Minnesota.
The Court is not persuaded by Cornet and Herron's argument. "Physical presence is not necessary for personal jurisdiction, and the lack of physical presence is not dispositive." Burger King, 471 U.S. at 476. Both Cornet and Herron exhibit sufficient contacts with the forum state to make it reasonably foreseeable they could be sued in Minnesota. Cornet and Herron knew they were employed by a Minnesota company and accepted all of the contacts resulting from such employment. Their status as SoftBrands employees as a result of SoftBrands acquiring CABS does not alter this analysis. See 12 Technologies US, Inc. v. Lanell, 2002 U.S. Dist. LEXIS 12067, at *2 (N.D. Tex. July 2, 2002) (noting that non-resident defendant became an employee as a result of plaintiff's acquisition of his former employer). Their paychecks were issued and their benefits administered from Minnesota and they attended annual "kick-off" sessions in Minnesota. Both Defendants were also issued laptop computers loaded with proprietary and confidential software from SoftBrands. They filed clients' orders for software or other equipment in Minnesota.
Viewing the facts in the light most favorable to the nonmoving party, Herron and Cornet's ultimate managers were also located in Minnesota. Furthermore, they both entered into confidentiality agreements with a Minnesota company that were governed by Minnesota law. See ComputerUser.com, Inc. v. Tech. Publ'ns, LLC, 2002 U.S. Dist. LEXIS 13453, at *17 (D. Minn. July 20, 2002) (finding that entering into a license agreement and contractual arrangements were sufficient to confer jurisdiction over the defendant when combined with the relationship between the parties). Herron also signed an Electronic Systems Policy Agreement and admits to having over 15,000 workrelated e-mails referencing Minnesota. Although they accounted for a minority of their clients, both Cornet and Herron had multiple Minnesota customers. See 12 Technologies, 2002 U.S. Dist. LEXIS 12067, at *15-16. Similar contacts have been held sufficient to support personal jurisdiction over nonresident defendants. See Equifax Services, Inc. v. Hitz, 905 F.2d 1355, 1358-59 (10th Cir. 1990).
Furthermore, this action arises directly from Herron and Cornet's alleged breach of their confidentiality agreements, demonstrating a nexus exists between the contacts and the cause of action. See West Publishing Corp. v. Stanley, 2004 U.S. Dist. LEXIS 448, at *17 (D. Minn. January 7, 2004). In addition, at the very least, Herron and Cornet's contacts with SoftBrands' Minnesota office and Minnesota clients fostered a relationship that enabled them to gain the alleged confidential and proprietary information. See Northrup King Co., 51 F.3d at 1388-89 (finding personal jurisdiction appropriate by concluding that although some contacts by the non-resident defendant with the forum state had "nothing to do with the subject matter of the litigation" the contracts were "an essential part of the course of dealing between the two companies" and served to "foster a continuation of the business relationship").
2. Johansson
Johansson contests he was ever an employee of a Minnesota corporation. Although Johansson acknowledges he was a CABS employee when the company was acquired in 1999, he claims CABS was purchased by Fourth Shift, which was later purchased by ArtemisSoft. He argues ArtemisSoft was a Delaware corporation with its principal place of business in New Jersey, and did not become SoftBrands, and relocate to Minnesota, until after Johansson resigned in 2001. As a result, Johansson claims he was never a SoftBrands employee.
Notably, Johansson's first deposition and Defendants' Memorandum of Law in Support of Motion to Dismiss make several references to SoftBrands as the purchaser of CABS, as Johansson's employer and as the entity which required him to sign a confidentiality agreement. See Johansson Decl. ¶¶ 2, 4-7; Defs.' Mem. of Law in Supp. of Mot. to Dismiss [Docket No. 8] at 2-5, 9. It is only in Johansson's Second Deposition and Defendants' Reply Memorandum of Law in Support of Motion to Dismiss that Johansson claims he was never a SoftBrands' employee. See Johansson Decl. II ¶¶ 2-10; Defs.' Reply Mem. in Supp. of Mot. to Dismiss [Docket No. 30] at 6-7.
As noted, when resolving a motion to dismiss for lack of jurisdiction, the Court must view the facts in the light most favorable to the plaintiff and resolve all factual disputes in favor of the plaintiff. Dakota Industries, 946 F.2d at 1387. SoftBrands claims that, although it has previously operated under different names, it has always been a Minnesota corporation with its principal place of business in Minnesota. For the purposes of this motion, SoftBrands' assertion that it acquired CABS in 1999 will be accepted. Johansson was a CABS employee in 1999 and did not resign until 2001. Again, it is immaterial that Johansson became a SoftBrands' employee through the acquisition of his former employer. See 12 Technologies, 2002 U.S. Dist LEXIS 12067, at *2. Johansson attended annual sales meetings in Minnesota, his paychecks and benefits were administered from Minnesota, and he was issued a laptop computer loaded with confidential and proprietary software by SoftBrands. In 2000, Johansson signed SoftBrands' confidentiality and Electronic Systems Policy agreements with Minnesota law references. These contracts were explicitly governed by Minnesota law. Specific jurisdiction is appropriate where the instant dispute directly arises out of the breach of those agreements and Johansson's Minnesota contacts with SoftBrands enabled him to gain the alleged confidential and proprietary information.
3. MLC
The parties do not contest MLC is not licensed to do business in Minnesota, does not have a person authorized to accept service in Minnesota and has never provided products or services to anyone in Minnesota.
Defendants rely on Drayton Enterprises, L.L.C. v. Dunker for the proposition that merely hiring employees who once worked for the Plaintiff is insufficient to confer specific jurisdiction in the plaintiff's forum state. 142 F. Supp. 2d 1171 (D.N.D. 2001). In Drayton, the North Dakota District Court held that merely hiring a former employee was not sufficient to establish personal jurisdiction over an Oklahoma corporation because it had not "reach[ed] into" North Dakota to hire the employee and any trade secrets that were disclosed were revealed in Oklahoma. Id. Drayton's reasoning would be more persuasive if MLC's only alleged contract with Minnesota was hiring employees who formerly worked for SoftBrands in Colorado. In the instant case, however, MLC has other contacts sufficient to support specific jurisdiction in the forum state. As the Sixth Circuit has noted;
Business is transacted in a state when obligations created by the defendant or business operations set in motion by the defendant have a realistic impact on the commerce of that state; and the defendant has purposefully availed himself of the opportunity of acting there if he should have reasonably foreseen that the transaction would have consequences in that state.Compuserve, Inc. v. Patterson, 89 F.3d 1257, 1265 (6th Cir. 1996).
Although the parties debate who initiated the contact, SoftBrands and MLC entered into extensive negotiations in an attempt to establish an independent contractor relationship. For the purposes of this Motion, it is unnecessary to resolve which party initially proposed the idea. See Resuscitation Technologies, Inc. v. Continental Health Care Corp., 1997 U.S. Dist LEXIS 3523, at * 9-18 (S.D. Ind. 1997) (finding that non-resident defendant established sufficient contacts for specific jurisdiction through failed negotiations with corporation located in forum state). The negotiations went beyond mere inquiries about the feasibility of a partnership and progressed to the point where multiple drafts of an independent contractor agreement were developed. Several of the provisions in the draft contract required MLC to abide by agreements governed by Minnesota law. Negotiations ultimately failed, at least in part, because MLC refused to accept certain confidentiality provisions proposed by SoftBrands. MLC was aware it was engaged in extensive negotiations to partner with a Minnesota company and that the resulting contract would realistically impact the commerce in that state. Furthermore, SoftBrands contends the purpose of the proposed independent contractor relationship was to give MLC the authority to provide consulting services for SoftBrands' products. When the proposed partnership failed, SoftBrands claims MLC began providing services and products that violated Defendants' confidentiality agreements. As a result, the present action is related to the failed independent contractor negotiations.
Furthermore, Herron continued to contact SoftBrands' personnel in Minnesota for assistance with SoftBrands' software after he had resigned and joined MLC. During these communications, Herron allegedly did not disclose that he was no longer a SoftBrands' employee. Personal jurisdiction may be invoked based on the actions of an individual's agent. See Source Associates, Inc. v. Suncast Group, 709 F. Supp. 1023 (D. Kan. 1989).
As MLC has sufficient contacts to support asserting personal jurisdiction in Minnesota, it is unnecessary to determine whether MLC's website, which lists SoftBrands' trademarked product and offers a hyperlink to SoftBrands' website, is a sufficient contact. Similarly, it is unnecessary for this Court to determine whether the purpose of Johansson's e-mail to Christianson at Turck was to solicit business. Both of these avenues of contact may be plausible bases for asserting specific jurisdiction but need not be reached here.
4. Secondary Factors
An evaluation of the final two factors for determining whether personal jurisdiction is appropriate — the interest of the forum state in providing a forum for its residents and the convenience of the parties — does not alter the Court's conclusion that it may exercise specific jurisdiction over each of the Defendants. Minnesota has an interest in providing a forum for its citizens to litigate alleged tortious conduct and enforce consumer protection suits. Marshall v. Inn on Madeline Island, 610 N.W.2d 670, 676 (Minn.Ct.App. 2000); State by Humphrey v. Granite Gate Resorts, Inc., 568 N.W.2d 715, 721 (Minn.Ct.App. 1997). Defendants' primary argument with regard to these secondary factors was that it would be inconvenient for the parties to litigate in two different forums if this Court found personal jurisdiction existed in Minnesota for some but not all Defendants. Since personal jurisdiction is appropriate over all Defendants, this concern is now moot. Although it may not be as convenient for Defendants to litigate in Minnesota, "the convenience issue is rarely dispositive" and Defendants offer no reason that would override Plaintiff's choice of forum.Marquette Nat'l Bank of Minneapolis v. Norris, 270 N.W.2d 290, 295 (Minn. 1978).
As previously noted, jurisdiction need not be proved by a preponderance of the evidence until trial. Dakota Industries, 946 F.2d at 1387. To defeat a motion to dismiss, plaintiff need only make a prima facie showing of personal jurisdiction over the defendant. Id. After viewing the facts in the light most favorable to the Plaintiff and resolving all factual disputes in favor of the Plaintiff, the Court holds sufficient contacts with Minnesota exist to support personal jurisdiction over all Defendants.
The finding of jurisdiction over each of the Defendants obviates the need to address Defendants' transfer of venue argument.