Krypt, Inc. v. Ropaar LLC

          ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND [RE: ECF 15]

          BETH LABSON FREEMAN UNITED STATES DISTRICT JUDGE

         Krypt, Inc. (“Krypt”) brings this suit against its former employee Clay Robinson (“Robinson”) and Ropaar LLC (“Ropaar”) in connection with Robinson's decision to leave Krypt's employ and join Ropaar. Ropaar now moves to dismiss the claims against it pursuant to Federal Rule of Civil Procedure 12(b)(2) on the ground that this Court does not have personal jurisdiction over Ropaar. For the reasons discussed below, the motion to dismiss is GRANTED WITH LEAVE TO AMEND.

         I. BACKGROUND

         Unless otherwise noted, the following factual allegations are drawn from the Complaint, ECF 1 (“Compl.”).

         Plaintiff Krypt is a California corporation with its principal place of business in San Jose, California. Compl. ¶ 13. It is a “business and systems consulting firm, which provides System Applications Products (‘SAP') solutions for small and large corporations.” Id. ¶ 16. Specifically, Krypt provides “consulting services, pre-developed products, and specialized methodologies” for its customers. Id.

         Defendant Ropaar is a Texas limited liability corporation with its principal place of business in Texas.^[1] According to Krypt, Ropaar “also provides SAP solutions for corporations” and thus is “currently a direct competitor of Krypt's.” Id. ¶ 3, 17. Ropaar disputes that it is a “direct competitor” of Krypt, however. In declarations submitted by Jitendra Singh, Ropaar's sole managing member, Ropaar explains that it “is rare for Ropaar to be bidding on the same contracts as Krypt” because Ropaar is much smaller than Krypt and “works in a subset of IT consulting domains that Krypt targets.” ECF 26-1 (“Second Singh Decl.”) ¶ 6. Moreover, with regard to geographic competition, Ropaar represents that it “does not transact any business in California, ” that it currently “does not have any contracts with California companies, ” and that its relationship with its only former California customer ended in February 2013. ECF 15-1 (“First Singh Decl.”) ¶¶ 3-4. Ropaar further asserts that none of Ropaar's employees or contractors are residents of California and that it “does not have any assets or property in California. Id. ¶¶ 3, 5.

         Defendant Robinson worked at Krypt from May 1, 2016 to February 12, 2019, Compl. ¶ 32, and now works at Ropaar, id. ¶ 48. Although Krypt is headquartered in California and Ropaar is headquartered in Texas, Robinson was a resident of Washington County, Arkansas “at all times relevant to the Complaint.” Id. at 15.

         While at Krypt, Robinson served as a Professional Services Consultant. As a result, Robinson was apparently “entrusted with access to all of Krypt's Confidential Information, including but not limited to information about Krypt's strategy and expansion plans, as well as customer lists concerning clients and prospective clients.” Id. ¶ 38. He also “provided services in California on one or more occasion, including from Krypt's California offices, and including to California-based Krypt clients.” Id. ¶ 41. On January 29, 2019, Robinson resigned from Krypt, explaining that “a member of his family had health problems that limited Robinson's ability to travel.” Id. ¶ 43. Robinson also told Krypt that he “was leaving the SAP industry entirely and would begin working for Smithfield Foods, a meat-packing company.” Id.

         On April 4, 2019, however, Krypt learned that Robinson had not left Krypt to join Smithfield Foods but had instead began working for Ropaar. Id. ¶ 48. Following that revelation, Krypt conducted a forensic examination of Robinson's company-issued laptop. Id. ¶ 49. At the outset, Krypt found that Robinson had deleted his local account on the computer prior to his departure. Id. ¶ 50. Nevertheless, the forensic examination was able to discover “that on February 5, 2019-seven days before his last day of employment with Krypt-Robinson used his Krypt-issued laptop to log into and access his Ropaar email.” Id. ¶ 51. The forensic examination also suggested that, between January 29, 2019 and February 12, 2019, Robinson “accessed a number of files containing Krypt's Confidential Information” and uploaded a “substantial amount” of that information “to non-Krypt cloud accounts at DropBox, OneDrive, and/or to a USB flash drive.” Id. ¶ 52. Finally, the forensic examination “show[ed] that Robinson uploaded . . . a complete copy of his laptop's ‘desktop' to some unknown form of storage.” Id. ¶ 54.

         Meanwhile, Krypt believed that Ropaar had “launched a campaign to poach Krypt's employees . . . after they had been trained by Krypt and given access to Krypt's invaluable Confidential Information.” Id. ¶ 28. For example, Ropaar purportedly made an employment offer to Rajesh Malle in May 2015, which Malle ultimately accepted. Krypt alleges that at least four of Ropaar's seven employees were recruited directly from Krypt. Id. ¶ 31.

         Based on the forensic examination of Robinson's computer and Krypt's belief that Ropaar has been systematically poaching Krypt employees, Krypt now alleges that “Ropaar and Robinson have been acting in concert to design and execute a plan to obtain and misappropriate Krypt's Confidential Information.” Id. ¶ 55.

         Accordingly, on June 7, 2019, Krypt filed a complaint against Robinson and Ropaar. See ECF 1. The Complaint contains three claims: (1) a claim for misappropriation of trade secrets under the federal Defend Trade Secrets Act, 18 U.S.C. §§ 1836 et seq., against both Defendants; (2) a claim for misappropriation of trade secrets under the California Uniform Trade Secrets Act, Cal. Civ. Code §§ 3426 et seq., against both Defendants; and (3) a common law breach of contract claim against Robinson. Id. ¶¶ 56-83. The breach of contract claim-which is not at issue in the instant motion-is based upon Robinson's alleged breach of two agreements he signed upon accepting the position at Krypt: an offer letter (the “Offer Letter”) and a Confidential Information and Invention Assignment Agreement (the “CIIAA”). See Id. ¶¶ 33, 78, 81.

         On August 9, 2019, Ropaar moved to dismiss the two claims against it for lack of personal jurisdiction. ECF 15 (“Mot.”). The motion has been fully briefed, ECF 24 and 26, and the Court heard oral argument on December 5, 2019, ECF 37.

         II. LEGAL STANDARDS

         Federal Rule of Civil Procedure 12(b)(2) authorizes a defendant to seek dismissal of an action for lack of personal jurisdiction. See Fed. R. Civ. P. 12(b)(2). “In opposing a defendant's motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing that jurisdiction is proper.” CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1073 (9th Cir. 2011). Courts may consider evidence presented in affidavits and declarations in determining personal jurisdiction. Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001). “Where, as here, the defendant's motion is based on written materials rather than an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdictional facts to withstand the motion to dismiss.” Ranza v. Nike, Inc., 793 F.3d 1059, 1068 (9th Cir. 2015) (internal quotation marks and citation omitted).

         “Uncontroverted allegations in the complaint must be taken as true, and factual disputes are construed in the plaintiff's favor.” Freestream Aircraft (Bermuda) Ltd. v. Aero Law Grp., 905 F.3d 597, 602 (9th Cir. 2018). If, however, the defendant adduces evidence controverting the allegations, the plaintiff must “come forward with facts, by affidavit or otherwise, supporting personal jurisdiction, ” Scott v. Breeland, 792 F.2d 925, 927 (9th Cir. 1986), for a court “may not assume the truth of allegations in a pleading which are contradicted by affidavit.” Data Disc, Inc. v. Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1284 (9th Cir. 1977). Moreover, conclusory allegations or “formulaic recitation of the elements” of a claim are not entitled to the presumption of truth. Ashcroft v. Iqbal, 556 U.S. 662, ...