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Integrated Practice Solutions, Inc. v. Wilson

United States District Court, Ninth Circuit

July 31, 2013

INTEGRATED PRACTICE SOLUTIONS, INC., a Washington corporation, Plaintiff,
v.
DEREK WILSON, an individual; FUTURE HEALTH ACQUISITION, INC., a South Dakota corporation; and DOES 1-20, inclusive, Defendants.

ORDER DENYING DEFENDANTS' MOTION TO DISMISS AND GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR JURISDICTIONAL DISCOVERY

BARRY TED MOSKOWITZ, Chief District Judge.

On February 25, 2013, Defendant Future Health Acquisition, Inc. ("Future Health") filed a motion to dismiss the action (ECF No. 12). Because Future Health's motion to dismiss is based in part on claims of lack of jurisdiction, Plaintiff Integrated Practice Solutions, Inc. ("Plaintiff" or "IPS") filed a motion for jurisdictional discovery on March 29, 2013 (ECF No. 19). In a notice filed nunc pro tunc to June 7, 2013, Defendant Derek Wilson joined Future Health's motion to dismiss (ECF No. 44). For the reasons below, Defendants' motion to dismiss is hereby DENIED without prejudice pending jurisdictional discovery. Further, Plaintiff's motion for jurisdictional discovery is hereby GRANTED in part and DENIED in part.

I. BACKGROUND FACTS

IPS is a Washington corporation with its principal place of business in San Diego County, California. IPS designs, sells, and services practice management computer software for chiropractors and other healthcare professionals, including features to aid with billing, scheduling patient visits, managing patient records, and tracking inventory.

IPS maintains a list of current and prospective customers that it alleges would be extremely valuable to competitors. Defendant Derek Wilson worked for IPS as a Sales Representative and Vice President of Sales from approximately January 2010 to August 20, 2012. Soon after leaving IPS, he began working for Future Health, a competitor of IPS. IPS alleges that, according to a former employee of Future Health named David Fink, within a few days of starting at Future Health, Defendant Wilson said that he had found about 6, 000 "leads" from trade shows since 2010 that had not yet been put into Future Health's database as potential customers. IPS alleges that these "leads" were in fact copied from IPS's customer list, which Defendant Wilson misappropriated.

IPS brought this suit on January 11, 2013 against Future Health and Wilson, alleging the following causes of action: 1) breach of contract/specific performance; 2) breach of duty of loyalty; 3) misappropriation of trade secrets; and 4) violation of California Business & Professional Code ยง 17200 et seq.

II. DISCUSSION

Defendants move to dismiss for lack of personal jurisdiction, lack of subject-matter jurisdiction, and improper venue. In turn, Plaintiff moves for limited jurisdictional discovery as to: 1) whether this Court has personal jurisdiction over Future Health; and 2) whether Defendant Wilson's domicile is in California or Iowa, which would determine whether this Court has subject-matter jurisdiction. "[D]iscovery should ordinarily be granted where pertinent facts bearing on the question of jurisdiction are controverted or where a more satisfactory showing of the facts is necessary.'" Laub v. U.S. Dep't of Interior , 342 F.3d 1080, 1093 (9th Cir. 2003) (quoting Butcher's Union Local No. 498 v. SDC Inv., Inc. , 788 F.2d 535, 540 (9th Cir.1986). When reviewing a motion to dismiss, the allegations of material fact in plaintiff's complaint are taken as true and construed in the light most favorable to the plaintiff. See Parks Sch. of Bus., Inc. v. Symington , 51 F.3d 1480, 1484 (9th Cir. 1995). However, the plaintiff has the burden of establishing that jurisdiction exists. Scott v. Breeland , 792 F.2d 925, 927 (9th Cir. 1986).

A. Personal Jurisdiction

Future Health argues that the Court does not have personal jurisdiction over it because it does not have "minimum contacts" with California as required to comport with "traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington , 326 U.S. 310, 316 (1945) (internal quotations omitted).

There are two kinds of personal jurisdiction, general and specific. The Court has general jurisdiction over a nonresident defendant where the defendant has "substantial" or "continuous and systematic" contacts with the state, such that it may be haled into court in that state for any action without violating due process. See Hirsch v. Blue Cross, Blue Shield of Kansas City , 800 F.2d 1474, 1477 (9th Cir. 1986). However, "[t]he standard for establishing general jurisdiction is fairly high, ' and requires that the defendant's contacts be of the sort that approximate physical presence." Bancroft & Masters, Inc. v. Augusta Nat. Inc. , 223 F.3d 1082, 1086 (9th Cir. 2000) (citation omitted).

Alternatively, specific jurisdiction exists where: (1) the non-resident defendant has performed some act or consummated some transaction within the forum or otherwise purposefully availed himself of the privilege of conducting activities in the forum, (2) the claim arises out of or results from the defendant's forum-related activities, and (3) the exercise of jurisdiction is reasonable. Id. at 1086.

The Court holds that IPS has not alleged sufficient facts to indicate that Future Health has ties to California that rise to the level needed to establish general jurisdiction. A lone salesman - regardless of whether he may be considered an employee or independent contractor under the law - and the occasional trade show in California are a far cry from contacts "of the sort that approximate physical presence." See Congoleum Corp. v. DLW Aktiengesellschaft , 729 F.2d 1240, 1242 (9th Cir. 1984) ("[N]o court has ever held that the maintenance of even a substantial sales force within the state is a sufficient contact to assert jurisdiction in an unrelated cause of action.") Moreover, there is nothing to indicate that Future Health's website actually targets California residents. "The standard [for general jurisdiction] is met only by continuous corporate operations within a state that are thought so substantial and of such a nature as to justify suit against the defendant on causes of action arising from dealings entirely distinct from those activities." CollegeSource, Inc. v. AcademyOne, Inc. , 653 F.3d 1066, 1074 (9th Cir. 2011) (citing King v. Am. Family Mut. Ins. Co. , 632 F.3d 570, 579 (9th Cir. 2011)) (internal quotations and alterations omitted). Since Plaintiff has failed to allege sufficient facts showing general jurisdiction, discovery is inappropriate.

As to whether the Court has specific jurisdiction over Future Health, that hinges on Future Health's involvement, or lack thereof, with the alleged actions of Defendant Wilson in misappropriating IPS's customer list. Misappropriation of trade secrets is an intentional tort. Thus, purposeful availment is analyzed under the "effects" test from Calder v. Jones , 465 U.S. 783 (1984). See Dole Food Co., Inc. v. Watts , 303 F.3d 1104, 1111 (9th Cir. 2002). Under that test, the defendant must be alleged to have (1) committed an intentional ...


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