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North American Lubricants Company v. Shane A. Terry

March 31, 2012



On July 13, 2011, the court heard argument on defendants' motion to dismiss for lack of jurisdiction and improper venue or, in the alternative, to transfer venue, and on plaintiff's motion to seal portions of its evidentiary showing in opposition to the motion. Matthew J. Ruggles and Eric C.Ostrem of Littler Mendelson appeared for defendants; Robert C. Weems, Weems Law Office, appeared for plaintiff. For the reasons set forth below, defendants' motion to dismiss is granted. Plaintiff's motion to seal is denied but redaction is allowed.


Plaintiff North American Lubricants Company (NALC) is a Delaware corporation with its principal place of business in Arizona; it is engaged in interstate commerce, including in this district. Complaint (Compl.) ¶ 6. Defendant United Petroleum Company, LLC (UPC) is an Arizona Limited Liability Company with headquarters in Scottsdale, Arizona; it, too, is engaged in interstate commerce. Id. ¶ 7. Defendant Shane Terry (S. Terry), an Arizona resident, was President of NALC from November 2005 until January 26, 2011 and is founder, member and President of UPC. Defendant Michael Goldman was NALC's National Account Sales Manager from February 2010 through May 6, 2011. Id. ¶ 52. He is currently Vice President of the National Distribution Alliance for UPC. Id. ¶ 10. Defendant Gavin Hensing was NALC's National Account Sales Manager from August 2008 through April 30, 2011 and is currently UPC's Vice President of Business Development. Id. ¶ 11.

Defendant Claude Terry (C. Terry), a resident of California,*fn1 is Executive Vice President of UPC. Id. ¶ 13. Defendant Paul Ormond, a member and director of UPC, is resident of Ohio. Id. ¶ 14. Defendants Ralph H. Palmen and Gary O'Malley are members and directors of UPC and are residents of Washington. Id. ¶ 15-16.

Plaintiffs allege violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030; the Arizona Trade Secrets Act; misappropriation and conversion; breach of contract; breach of implied covenant and good faith and fair dealing; tortious interference with contract; unfair competition in violation of the Lanham Act, 15 U.S.C. §§ 1114(1)(a) & 1125(a); common law unfair competition; unfair competition in violation of Cal. Civ. Code §§ 17200, et seq. and the common law of Arizona; and breach of fiduciary duty by corporate officers and managers. Id. ¶¶ 94-172. All of these claims stem from the defendants' alleged violation of their agreement to avoid conflicts of interest with NALC and use of NALC's proprietary materials after Terry, Goldman and Hensing left NALC.


A. Threshold Evidentiary Issues

Defendants argue that most of plaintiff's showing is based on inadmissible evidence. Reply, ECF No. 23 at 7. A court may consider reliable hearsay for purposes of resolving questions of personal jurisdiction, though a plaintiff may not be able to meet its burden by relying on hearsay alone. Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1562 (Fed. Cir. 1994); Dejana v. Marine Technology, Inc., No. 1--CV-4029 (JS)(WDW), 2011 WL 4530012, at *3 (E.D.N.Y. Sep. 26, 2011); JHRG LLC v. Stormwatch, Inc., No. 1:09CV919, 2011 WL 3111971, at *9 (M.D.N.C. Jul. 26, 2011); but see Travelers Casualty & Surety Co. v. Telstar Construction Co., 252 F.Supp.2d 917, 923 (D. Ariz. 2003) (plaintiff must supply admissible evidence in support of its prima facie case). A court may properly consider jurisdictional facts taken from a defendant's marketing materials and other public documents, such as a defendant's website. Agilent Technologies, Inc., v. Elan Microelectronics Corp., No. C-04-05385 JW, 2005 WL 3260162, at *3 (N.D. Cal. Nov. 29, 2005).

Based on these general principles, the court declines to consider those portions of the Amended Declaration of Kyle Read (Read Decl.), ECF No. 21, which describe a meeting between a "faithful NALC employee" and C. Terry, id. ¶ 17; provide information about C. Terry's pastoral activities in California, id. ¶ 12; claim "on information and belief" that Microsoft and Facebook maintain server farmers in California, id. ¶ 13; report on contacts between NALC customers and Goldman and Hensing, id. ¶ 15; and claim that S. Terry met with a NALC customer in Stockton and perhaps had contact with one or two other NALC customers. Id. ¶ 20. In addition, to the extent that allegations in the complaint are contradicted by defendants' affidavits, the court will not consider them in deciding the jurisdictional questions. Compare, e.g., Compl. ¶ 52 (S. Terry "reported to the CEO and Board of NALC whose offices are in California, . . . and participated in numerous business activities in this district (including meetings with his CEO and Board of Directors) with Declaration of Shane Terry (S. Terry Decl.) ¶ 18 ("I met with the Board of Directors zero occasions in California between October 2005 and the date I left NALC. I met with Mr. Read, CEO from time to time (2 to 3 times a year) at his Pleasanton office for Oil Changers" (emphasis in original)).

B. The Facts Of Record

NALC is a Delaware corporation, which moved its headquarters from California to Arizona in 2006. Compl. ¶ 6; S. Terry Decl. ¶ 8. Several of its officers and its human resources operations are located in Pleasanton, California. Read Decl. ¶ 5. Hensing's and Goldman's last paychecks were issued from Pleasanton. Id. ¶ 15. NALC's computers and cell phones would be shipped to Pleasanton if there were severe problems. Id. ¶ 6. However, none of NALC's corporate functions - management, financial, marketing, administrative, or business operations - take place in California. S. Terry Decl. ¶ 13.

Thirty-seven percent of NALC's sales by revenue come from California; the next highest sales volume is from Texas. Read Decl. ¶ 18.*fn2 NALC has a product supplier in California and ships products from Louisiana to California for storage. Id. ¶ 19. Its California supplier accounts for only a small percentage of NALC's product. S. Terry Decl. ¶ 9. All of NALC's distributor contacts and agreements, customer files and lists, and lubricant data are stored in Arizona. Id.¶ 14.

When S. Terry worked for NALC, he traveled to California two to three times a year to meet with its CEO. Id. ¶ 18.

Shortly before leaving his employment with NALC, S. Terry's production fell markedly, he downloaded files to a USB drive, accessed NALC's file customer/supplier/prospect email addresses, downloaded NALC's Automotive Oil Change Association Distribution list, and deleted both his email archive and his "my documents" folder in violation of company policy. Read Decl. ¶¶ 8-11. In addition, shortly before defendant Goldman left NALC, he plugged a USB drive into the system. Id. ¶ 11. The computers and cell phones that had been assigned to S.

Terry, Goldman and Hensing were sent to California, apparently for forensic examination. Id. ¶¶ 6-7.

UPC is an Arizona limited liability corporation with its headquarters and agent for service of process in Arizona. Id., Ex. A; S. Terry Decl. ¶ 23. All of UPC's operations are conducted at its offices in Arizona, where all its employees work. S. Terry Decl. ¶¶ 23-24. The printout from the Arizona Department of Corporations, updated on April 13, 2011, lists C. Terry as one its managers and provides an address in Modesto, California. Read Decl. ¶ 12 & Ex. A.*fn3

In addition, a credit application on behalf of UPC from S. Terry, dated April 19, 2011, lists C. Terry as executive vice president with an address in Modesto. Read Decl. ΒΆ 12 & Ex. C. Nevertheless, UPC is not registered to do business in California, has no agent for service of process in California, and has obtained no licenses or other privileges from state or local ...

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