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Agjunction LLC v. Agrian Inc.

United States District Court, D. Kansas

July 9, 2014

AGJUNCTION LLC, Plaintiff,
v.
AGRIAN INC., ET AL. Defendant.

MEMORANDUM AND ORDER

DANIEL D. CRABTREE, District Judge.

Plaintiff AgJunction LLC filed this lawsuit against Defendants Agrian Inc. and five former AgJunction employees who now work for Agrian (the "Employee Defendants"). AgJunction claims that the defendants illegally copied AgJunction's proprietary and confidential agronomy software system in order to develop and sell a nearly identical competing product. Two individual defendants, Aaron D. Hunt and Matthew C. Dedmon, filed a motion to dismiss (Doc. 19), arguing that this Court lacks personal jurisdiction over them. For the reasons set forth be-low, the Court grants Defendants' Motion to Dismiss.

I. Factual Background

Because this matter is before the Court on a motion to dismiss, all well pleaded factual allegations in the Complaint are accepted as true and viewed in the light most favorable to the plaintiff, to the extent they are uncontroverted by affidavits or other written evidence. Wenz v. Memery Crystal, 55 F.3d 1503, 1505 (10th Cir. 1995). If the parties provide conflicting affidavits, the Court must resolve those factual disputes in the plaintiff's favor. Id.

AgJunction is a Delaware limited liability company that develops and sells precision agronomy hardware and software. Its headquarters are located in Hiawatha, Kansas. Agrian is a California corporation that has its own line of agronomy-related software products. In addition, Agrian sometimes acts as a reseller and sub-licenser of agricultural software made by other companies. In December 2012, AgJunction and Agrian entered into an agreement under which AgJunction granted Agrian access to its software in order to license the software to other firms.

On February 16, 2014, AgJunction filed a lawsuit against Agrian, alleging that Agrian unlawfully copied AgJunction's proprietary software to create and begin selling its own competing product. The lawsuit also named as defendants five former AgJunction employees now working for Agrian. One by one, from April 2013 through December 2013, those Employee Defendants resigned from AgJunction and began working for Agrian. AgJunction alleges that the Employee Defendants took confidential information about AgJunction's proprietary software with them when they left AgJunction and illegally provided it to Agrian.

Two of the Employee Defendants, Aaron D. Hunt and Matthew C. Dedmon, challenge AgJunction's proposition that this Court properly may exercise personal jurisdiction over them. In 2008, a company named GVM hired both Hunt and Dedmon, and they began working in Pennsylvania for a division of GVM known as "AgJunction." In January 2012, a Canadian company named Hemisphere GPS, which was headquartered in the province of Alberta, "acquired"[1] the "AgJunction" division of GVM. Hemisphere GPS eventually changed its name to AgJunction LLC, the plaintiff in this case.

When Hemisphere acquired "AgJunction" from GVM, Hemisphere presented both Hunt and Dedmon with employment agreements to sign. Among other things, those agreements prohibited Hunt and Dedmon from disclosing confidential information about AgJunction's software to third parties. They contained an Alberta choice-of-law provision and a permissive Alberta forum-selection clause.[2] In late January 2012, both Hunt and Dedmon signed their respective employment contracts in Pennsylvania and returned them to company headquarters in Alberta.

AgJunction remained a Canada-based company until November 2012, [3] when it moved its headquarters from Alberta to Hiawatha, Kansas. Neither Hunt nor Dedmon signed another employment agreement or made any amendments to the existing agreement. Furthermore, there is no evidence that either Defendants' work duties changed in any way. Both continued to work and live in Pennsylvania.

Hunt resigned from AgJunction in April 2013 and began working for Agrian. During his time with AgJunction, Hunt worked as Director of Technology of AgJunction's Cloud Services Division. His supervisor, Jeffrey A. Dearborn, was located in Memphis, Tennessee. The only regular communication that Hunt had with someone in the Hiawatha, Kansas, office was a weekly conference call involving employees in the company's Pennsylvania, Arizona, and Kansas offices to discuss the status of two AgJunction software projects, "HQ" and "ConnX." Hunt participated in the call on a regular basis, reporting his group's progress to AgJunction employee John Lueger at the Hiawatha office. The conference calls began in January 2013 and continued until Hunt left AgJunction in April 2013.

Dedmon resigned from AgJunction in August 2013 and also began working for Agrian. Dedmon worked as a Senior Developer for AgJunction, reporting to Hunt, who, as noted above, lived and worked in Pennsylvania. Dedmon rarely communicated with anyone in the Kansas office-in fact, AgJunction does not allege a single communication between Dedmon and Hiawatha (or any other locale in Kansas). After Hunt left the company, AgJunction chose Dedmon to convert one of its products to Apple's iOS format. In order to perform this task, Dedmon needed to obtain an Apple Developer Certification. The arrangements for this Certification and an attendant one-time $20, 000 payment to Dedmon originated from the Kansas office.

At all times relevant to this action, Hunt and Dedmon lived and worked in Pennsylvania. Hunt has visited Kansas only once, approximately five years ago and well before he began working for AgJunction. Dedmon has never had the pleasure of visiting Kansas.[4] Neither defendant owns or has ever owned property in Kansas.

AgJunction's Complaint seeks a preliminary injunction and also brings claims of breach of contract, breach of the covenant of good faith and fair dealing, intentional interference with business advantage, misappropriation of trade secrets, unfair competition, breach of the duty of loyalty, breach of fiduciary duty, tortious interference with employment contracts, and conspiracy.

II. Legal Standard

A plaintiff bears the burden of establishing personal jurisdiction over a defendant. Intercon, Inc. v. Bell Atlantic Internet Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir. 2000). When a court considers a pre-trial motion to dismiss for lack of personal jurisdiction without conducting an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdiction to de-feat the motion. AST Sports Sci., Inc. v. CLF Distrib. Ltd., 514 F.3d 1054, 1056-57 (10th Cir. 2008). "The plaintiff may make this prima facie showing by demonstrating, via affidavit or other written materials, facts that if true would support jurisdiction over the defendant." OMI Holdings, Inc. v. Royal Ins. Co. of Can., 149 F.3d 1086, 1091 (10th Cir. 1998).

The Court's subject matter jurisdiction over this suit is based on diversity of citizenship. "To obtain personal jurisdiction over a nonresident defendant in a diversity action, a plaintiff must show both that jurisdiction is proper under the laws of the forum state and that the exercise of jurisdiction would not offend due process." Intercon, 205 F.3d at 1247. Because Kansas' long-arm statute permits the exercise of any jurisdiction that is consistent with the United States Constitution, the personal jurisdiction analysis under Kansas law collapses into the inquiry required by the Due Process Clause. Id. This due process inquiry imposes two requirements: (A) the defendant must have minimum contacts with the forum state and (B) exercising jurisdiction must not offend traditional notions of fair play and substantial justice. OMI Holdings, 149 F.3d at 1091.

A. Minimum Contacts

The due process clause permits the exercise of personal jurisdiction over a nonresident defendant so long as the defendant purposefully established "minimum contacts" with the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985). This standard can be met in one of two ways.

First, a court may exercise general jurisdiction if the defendant's contacts with the forum are "so continuous and systematic as to render [it] essentially at home in the forum State" (brackets in original). Fireman's Fund Ins. Co. v. Thyssen Min. Const. of Can., Ltd., 703 F.3d 488, 493 (10th Cir. 2012). Hunt and Dedmon have never lived or owned property in Kansas and have visited the state a combined total of once. Therefore, Defendants' contacts are not so "continuous and systematic" that they warrant general jurisdiction over them in Kansas.

Second, a court may exercise specific jurisdiction if: (1) the out-of-state defendant "purposefully directed" his activities at residents of the forum state and (2) the plaintiff's injuries arose from those purposefully directed activities. Newsome v. Gallacher, 722 F.3d 1257, 1264 (10th Cir. 2013). The Tenth Circuit analyzes the "purposefully directed" requirement differently depending upon the cause of action alleged. See Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1071 (10th Cir. 2008). "In the tort context, we often ask whether the nonresident defendant purposefully directed' its activities at the forum state; in contract cases, meanwhile, we sometimes ask whether the defendant purposefully availed' itself of the privilege of conducting activities or consummating a transaction in the forum state." Id.

Recently, the Supreme Court addressed the issue of "minimum contacts" necessary to create specific jurisdiction. Walden v. Fiore, 134 S.Ct. 1115, 1121 (2014). In a unanimous opinion, the Court explained, "[f]or a State to exercise jurisdiction consistent with due process, the defendant's suit-related conduct must create a substantial connection with the forum State." Id. The Court emphasized two aspects ...


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