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Digital Ally, Inc. v. Utiity Associates, Inc.

United States District Court, D. Kansas

December 29, 2014

DIGITAL ALLY, INC., Plaintiff,
UTIITY ASSOCIATES, INC., et al., Defendants.


CARLOS MURGUIA, District Judge.

Plaintiff Digital Ally, Inc. is a Nevada corporation with its principal place of business in Johnson County, Kansas. Defendants are Utility Associates, Inc., a Delaware corporation with its principal place of business in Tucker, Georgia ("Utility"), and Eric McKee, who is proceeding pro se and is a resident of the state of Indiana. Plaintiff brought this suit alleging the fol lowi ng counts: (1) tortious interference with contract and expectations, (2) defamation/business libel arising out of false/unfounded claims of patent infringement, (3) injunctive relief regarding count two, (4) breach of employment agreement, (5) tortious interference with plaintiff's sales contracts and commercial expectations and customer relationships, (6) injunctive relief regarding count five, (7) tortious interference with plaintiff's employment agreement, (8) injunctive relief regarding count seven, (9) violation of the Kansas Uniform Trade Secrets Act pursuant to Kan. Stat. Ann. ยง 60-3320, et seq., (10) injunctive relief regarding count nine, (11) conversion, (12) false advertising, and (13) injunctive relief regarding count twelve. Against Utility are all counts except count four; against McKee are counts four, five, six, nine, ten, and eleven.

Before the court is Utility's Motion to Dismiss (Doc. 31).[1]

I. Facts

Plaintiff is a public company engaged in the business of designing, developing, manufacturing, and selling mobile digital recording equipment that is primarily used by law enforcement agencies, branches of the United States' Armed Forces, and other public and private organizations. Utility is a public company that competes with plaintiff in the area of mobile video recording and transmission.

Plaintiff employed defendant McKee until August 24, 2012, working as a sales manager for a region that included the states of Ohio, Indiana, and Michigan. On February 2, 2012, plaintiff and Mr. McKee entered into an employment agreement ("Employment Agreement") that contained non-compete and non-disclosure provisions. The agreement was to remain in effect for two years from the date of Mr. McKee's employment termination-regardless of reason. (in this case, the agreement was effective from August 24, 2012 to August 24, 2014.) In December 2013, Mr. McKee states that he twice told Utility's Vice President of Sales, Criss Cross, that he had the Employment Agreement with plaintiff. (Doc. 46.) In January 2014, Utility hi red Mr. McKee; he became a "sales agent" assigned to the Midwest region, which included the states of Ohio, Indiana, and Michigan. McKee aleges he again informed Mr. Cross of the non-compete agreement in January 2014 during a company meeting in his first week of employment. (Id.) Mr. McKee is no longer an employee of Utility.

II. Legal Standards for Personal Jurisdiction under Rule 12(b)(2)

Plaintiff has the burden to establish personal jurisdiction over each defendant. OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (10th Cir. 1998). Because the court decides this motion on the basis of affidavits and other written materials, plaintiff only needs to make a prima facie showing of personal jurisdiction. Id. The court assumes the allegations in the complaint are true to the extent they are not controverted, and all factual disputes are resolved in plaintiff's favor. See Sirader v. Biddinger, 633 F.3d 1235, 1239 (10th Cir. 2011) (discussing a motion to dismiss for lack of personal jurisdiction and stating "[w]e must resolve any factual disputes in the plaintiff's favor"). "In order to defeat a plaintiff's prima facie showing of jurisdiction, a defendant must present a compelling case demonstrating that the presence of some other considerations would render jurisdiction unreasonable.'" Proud Veterans, LLC v. Ben-Menashe, 12-CV-1126-JAR, 2014 WL 791200, A *4 (D. Kan. Feb. 27, 2014) (quoting OMI Holdings, 149 F.3d at 1091)).

III. Minimum Contacts

In federal diversity cases, the court's jurisdiction over defendants depends on the law of the forum state. Fed.R.Civ.P. 4(e); Marcus Food Co. v. DiPanfilo, 671 F.3d 1159, 1166 (10th Cir. 2011). The district court must determine: (1) whether the defendant's conduct falls within the forum state's long-arm statute, and (2) whether the exercise of personal jurisdiction over the defendant satisfies the constitutional guarantee of due process. See Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1070 (10th Cir. 2008) (citing Trujillo v. Williams, 465 F.3d 1210, 1217 (10th Cir. 2008)). Because Kansas courts construe the long-arm statute to the same limits allowed by federal due process, the court proceeds directly to the due process inquiry. OMI, 149 F.3d at 1090.

Analyzing due process is a two-step process. First, the court must find that the defendant has "minimum contacts" with the forum state such that the defendant should reasonably anticipate being haled into court there.'" Employers Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153, 1160 (10th Cir. 2010) (quoting OMI, 149 F.3d at 1091). Second, assuming those minimum contacts exist, the defendant's contacts must be such "that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945) (internal quotations omitted).

"Minimum contacts" may be established in two ways: general jurisdiction and specific jurisdiction. Plaintiff only alleges specific jurisdiction, so the court will conduct its analysis accordingly. The recent Supreme Court case, Walden v. Fiore, explains the "minimum contacts" analysis as it relates to specific jurisdiction. 134 S.Ct. 1115 (2014). Due process permits specific jurisdiction over a nonresident defendant where that defendant's suit-related conduct creates a substantial connection with the forum state. Id. at 1121. That relationship is governed by two principles: (1) it must arise out of the contacts that the defendant himself creates with the forum state, and (2) it looks to the defendant's contacts with the forum state itself-not the defendant's contacts with persons who reside there. Id. at 1122. In other words, a defendant's own actions must create contacts with the forum state-not the forum resident. Finally, due process requires that each defendant's contacts be analyzed independently, "based on [that defendant's] own affiliation with the state." Id.

In the Tenth Circuit, a court has specific jurisdiction over a nonresident defendant "if the defendant has purposefully directed' his activities at residents of the forum, and the litigation results from alleged injuries that arise out of or relate to' those activities." OMI Holdings, 149 F.3d at 1091 (quoting Burger King, 471 U.S. at 472). The Tenth Circuit explained how to evaluate whether a defendant "purposefully directed" his activities at the forum:

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. In all events, the shared aim of "purposeful direction" doctrine has been said by the Supreme Court to ensure that an out-of-state defendant is not bound to appear to account for merely "random, fortuitous, or attenuated contacts" with the forum state.

Dudnikov, 514 F.3d at 1071 (internal citations omitted).

Here, plaintiff alleges specific jurisdiction over Utility and McKee for tort and contract ...

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