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Hill-Rom Services Inc. v. Convergence Systems Ltd.

United States District Court, D. Arizona

October 31, 2019

Hill-Rom Services Incorporated, Plaintiff,
v.
Convergence Systems Limited, et al., Defendants.

          ORDER

          G. MURRAY SNOW CHIEF UNITED STATES DISTRICT JUDGE.

         Pending before the Court are Defendants Convergence Systems Limited, et al.'s (“Convergence”) and Jerry Garrett's (“Garrett”) individual Motions to Dismiss pursuant to Fed.R.Civ.P. 12(b)(2) and 12(b)(3), (Doc. 14, 15). Also pending before the Court are Plaintiff Hill-Rom Services Inc.'s (“Plaintiff”) Motion for Jurisdictional Discovery (Doc. 18) and Motion for Protective Order (Doc. 28). For the following reasons, Convergence's Motion to Dismiss is denied and Garrett's Motion to Dismiss is granted. Plaintiff's Motion for Jurisdictional Discovery is denied as moot. Defendants shall notify the Court within 14 days if they continue to object to Plaintiff's Motion for Protective Order.[1]

         BACKGROUND

         Plaintiff, an Indiana corporation, brings this action against Convergence and Garrett for, inter alia, the theft of its trade secrets and breach of an implied in fact contract. Convergence is organized under the laws of the Hong Kong Special Administrative Region and maintains its headquarters there. Garrett, a member of Convergence, is a citizen of the Hong Kong Special Administrative Region.

         Plaintiff is a health company that provides a range of patient care solutions. To assist healthcare personnel with the detection of incontinence events in hospital beds, Plaintiff began developing moisture detection systems that would detect and signal the presence of incontinence events to healthcare personnel (the “Project”). Convergence, which specializes in the design of radio frequency identification (“RFID”), was part of the design group on the Project. Convergence became involved in the Project through its relationship with Helvetia Wireless, LCC (“Helvetia”), a non-party to this action.

         Helvetia is a Delaware limited liability company with its principal place of business in Arizona. Helvetia sought Convergence's assistance integrating Convergence's RFID antennas and readers with Helvetia's moisture sensor system to help prepare a prototype sensor pad that could be shown, and possibly sold, to Plaintiff. As part of this collaboration, Convergence and Helvetia executed a Mutual Non-Disclosure Agreement (“NDA”). The NDA provides that “[a]ll Confidential Information shall remain the property of the discloser.” (Doc. 14-1 at 3.) (alterations in original). The NDA also contains an Arizona choice of law clause and a provision designating Arizona as the venue where disputes arising out of the NDA will be arbitrated. The location where the NDA was executed is not alleged. Plaintiff asserts that by entering into the NDA Convergence “agreed to treat and hold all Project information disclosed to it in strict confidence.” (Doc. 1 at 8.) Plaintiff further asserts that Convergence entered into the NDA “for the benefit of [Plaintiff].” (Doc. 1 at 9.) It is undisputed, however, that Plaintiff was not a signatory to the NDA.

         Throughout the course of the Project, Convergence made eight Project related shipments of Convergence products to Helvetia's Arizona office and engaged in frequent communications with Helvetia and other project personnel. In February 2014, at the request of Helvetia, Garrett, on behalf of Convergence, attended a Project meeting at Helvetia's Arizona office. Garrett gave a single presentation at the meeting regarding Convergence's products. According to Plaintiff, the Arizona meeting also included discussions, review, and testing of the incontinence detection solution proposed to Plaintiff at that time. Plaintiff also claims that during his time in Arizona, Garrett was privy to discussions regarding certain of Plaintiffs trade secrets. (Doc. 19-1 at 5.) Plaintiff contends that it made a presentation to the meeting attendees, including Garrett, explaining that the Project was confidential to Plaintiff and that all information, designs, and intellectual property generated from the Project were owned by Plaintiff.

         Sometime after Convergence's involvement in the Project ceased, Convergence filed for and was issued United States Patent No. 10, 134, 489 (the “Patent”). Garrett is named as an Inventor on the Patent, but Convergence is the named assignee. Plaintiff claims that the Patent improperly uses and discloses Plaintiff's trade secrets that Convergence and Garrett learned at the Arizona meeting. As a result, Plaintiff brought this action alleging, inter alia, misappropriation of trade secrets and breach of an implied in fact contract to maintain the confidentiality of any information disclosed during the Project. Convergence and Garrett move, in separate motions, to dismiss the Complaint in full for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2) and for improper venue pursuant to Rule 12(b)(3). (Doc. 14, 15.) Plaintiff responded in opposition to Defendants' motions arguing that Defendants are subject to personal jurisdiction pursuant to Rule 4(k)(1), or in the alternative Rule 4(k)(2). In a separate paper, Plaintiff requested the Court to issue an order granting 90 days for Plaintiff to conduct jurisdictional discovery. (Doc 18.)

         DISCUSSION

         I. Motions to Dismiss for Lack of Personal Jurisdiction

         A. Legal Standard

         “When a defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating that the court has jurisdiction over the defendant.” Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006). Where, as here, the motion to dismiss a complaint for lack of personal jurisdiction “is based on written materials rather than an evidentiary hearing, ‘the plaintiff need only make a prima facie showing of jurisdictional facts.'” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004).

         When determining the sufficiency of a prima facie showing, “[t]he court may consider evidence presented in affidavits.” Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001). The court must assume as true all uncontroverted facts in the complaint and must interpret all evidentiary disputes in the plaintiff's favor. See Schwarzenegger, 374 F.3d at 800. However, “the plaintiff cannot simply rest on the bare allegations of its complaint” if controverted by evidence incorporated into the defendant's motion. Id. (internal quotation omitted); see also Data Disc, Inc. v. Sys. Tech. Assocs., 557 F.2d 1280, 1284 (9th Cir. 1977) (A court “may not assume the truth of allegations in a pleading which are contradicted by affidavit.”). All evidence must be admissible to be considered. See Travelers Cas. & Sur. Co. of Am. v. Telstar Const. Co., Inc., 252 F.Supp.2d 917, 923 (D. Ariz. 2003).

         B. Personal Jurisdiction

         A federal court sitting in diversity “applies the personal jurisdiction rules of the forum state provided the exercise of jurisdiction comports with due process.” Scott v. Breeland, 792 F.2d 925, 927 (9th Cir. 1986). The Arizona long arm statute is co-extensive with the limits of federal due process. See Doe v. Am. Nat'l Red Cross, 112 F.3d 1048, 1050 (9th Cir. 1997) (citing Batton v. Tenn. Farmers Mut. Ins. Co., 153 Ariz. 268, 270, 736 P.2d 2, 4 (1987)); see also Ariz. R. Civ. P. 4.2(a). “Due process requires that nonresident defendants have certain minimum contacts with the forum state, so that the exercise of personal jurisdiction does not offend traditional notions of fair play and substantial justice.” Doe, 112 F.3d at 1050 (citing Int'l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945)).

         There are two types of personal jurisdiction-general and specific. See Daimler AG v. Bauman, 571 U.S 117, 126-27 (2014). Plaintiff does not argue that Convergence or Garrett is subject to general personal jurisdiction in Arizona; thus, only specific personal jurisdiction need be considered.

         1. Convergence

         Convergence has sufficient minimum contacts with Arizona to be subject to specific personal jurisdiction in the state. “There are three requirements for a court to exercise specific jurisdiction over a nonresident defendant: (1) the defendant must either ‘purposefully direct his activities' toward the forum or ‘purposefully avail[ ] himself of the privileges of conducting activities in the forum'; (2) ‘the claim must be one which arises out of or relates to the defendant's forum-related activities'; and (3) ‘the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable.'” Axiom Foods, Inc. v. Acerchem Int'l, Inc., 874 F.3d 1064, 1068 (9th Cir. 2017) (quoting Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1111 (9th Cir. 2002)). Plaintiff bears the burden of establishing the first two prongs of the test. Id. If Plaintiff succeeds, the defendant must show that exercising jurisdiction over it would be unreasonable. Id. at 1069.

         a. Purposeful Availment/Direction

         The first prong of the specific jurisdiction test is divided into two concepts: “purposeful direction” and “purposeful availment.” See Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004). Purposeful direction is typically used in tort actions, while purposeful availment is typically used in contract actions. Id. Although Plaintiff alleges claims that sound in both tort and contract, it may establish jurisdiction for all claims under either test. See Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015) (“If personal jurisdiction exists over one claim, but not others, the district court may exercise pendent personal jurisdiction over any remaining claims that arise out of the same ‘common nucleus of operative facts' as the claim for which jurisdiction exists.”).

         Purposeful direction requires the defendant to “(1) commit[] an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state.” Dole Food Co., Inc., 303 F.3d at 1111. Plaintiff does not argue that Convergence expressly aimed any conduct at Arizona, or that it was foreseeable that Plaintiff would suffer any harm in Arizona. Instead, Plaintiff ...


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