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Ivanti, Inc. v. Shea

United States District Court, D. Utah

February 21, 2018

STEPHEN SHEA, Defendant.


          Ted Stewart United States District Judge.

         This matter is before the Court on Defendant's Motion to Dismiss for Lack of Jurisdiction. For the reasons stated below, the Court will deny Defendant's Motion.

         I. BACKGROUND

         Plaintiff Ivanti, Inc. (“Ivanti”) is a corporation with its principal place of business in South Jordan, Utah. Plaintiff LANDesk Software Singapore Pte., Ltd. (“LANDesk Singapore”) is a corporation formed under the laws of Singapore, with its principal place of business in Singapore, and is a wholly-owned subsidiary of Plaintiff Ivanti, Inc. Plaintiffs are international information technology solutions companies which distribute products and services around the world.

         Defendant Stephen Shea (“Defendant”) is a United States citizen residing in Chiang Mai, Thailand. Defendant was employed in the Asia Pacific region by Plaintiffs, or the companies purchased and rebranded by Ivanti, for 13 years. The Asia Pacific region includes multiple Southeast Asian countries, Australia, and New Zealand. During Defendant's employment, he “headed up the [Asia Pacific] region of Ivanti's supply chain sales organization, literally building Ivanti's business in that region from scratch into a multimillion-dollar per year sales organization.”[1] Originally, Defendant worked as a contractor for Wavelink, a Utah-based company later acquired by LANDesk. In October 12, 2012, Defendant entered into an employment agreement with LANDesk Singapore (“the Agreement”). LANDesk was rebranded as Ivanti in 2017.

         On October 4, 2017, Defendant elected to terminate his employment with Plaintiffs. Defendant cited a desire to take time off to care for his elderly parents, who reside in California, as the reason for his departure. Defendant's official last day with the company was November 3, 2017.

         Since Defendant's departure, Plaintiffs learned that Defendant has been contacting and soliciting Plaintiffs' customers on behalf of StayLinked, one of Plaintiffs' direct competitors. Plaintiffs believe that Defendant has used confidential trade secret information in his attempts to convince Plaintiffs' customers to switch to StayLinked in violation of the Agreement. Plaintiffs also believe that Defendant began the process of supporting StayLinked months before tendering his resignation.

         As a result of this alleged conduct, Plaintiffs issued a cease-and-desist letter to Defendant on January 12, 2018. Defendant responded on January 17, 2018, wherein he admitted knowledge of the Agreement and declined to comply with Plaintiffs' demands. On January 26, 2018, Plaintiffs filed a Complaint against Defendant in this Court for injunctive relief. That same day, Plaintiffs filed a Motion for Temporary Restraining Order to enjoin Defendant from further competing with Plaintiffs and misappropriating thier trade secrets. Upon receiving the Motion, the Court scheduled a hearing for February 7, 2018. Plaintiffs served Defendant with their Complaint, Motion, and Notice of Hearing, wherein Defendant was ordered to respond by February 1, 2018. Defendant failed to do so. However, on February 6, 2018, Defendant's attorney filed a Notice of Appearance “for the limited purpose of opposing jurisdiction.”[2]

         As a result of the Notice, the Court struck the hearing and ordered expedited briefing regarding the Court's jurisdiction over Defendant. The parties filed simultaneous briefing on the matter on February 12, 2016, and filed their respective responses on February 16, 2018. The issue has now been fully briefed and is ripe for decision.


         Federal Rule of Civil Procedure 12(b)(2) is the vehicle by which a party may move for dismissal based on lack of personal jurisdiction. Plaintiffs bear the burden of establishing jurisdiction over Defendant.[3] When a motion to dismiss for lack of personal jurisdiction is brought before trial and supported by affidavits and other written materials, the plaintiff need only make a prima facie showing of jurisdiction.[4] “The ‘well pled facts' of the complaint must be accepted as true if uncontroverted by the defendant's affidavits, and factual disputes at this initial stage must be resolved in the plaintiff's favor when the parties present conflicting affidavits.”[5]

         Plaintiffs' Complaint invokes federal question jurisdiction under 28 U.S.C. § 1331 and 18 U.S.C. § 1836, the Federal Defense of Trade Secrets Act (“the DTSA”). “It is well established that when . . . a federal statute provides the basis for jurisdiction, the constitutional limits of due process derive from the Fifth, rather than the Fourteenth, Amendment.”[6] Under the Fifth Amendment, before the Court can assert personal jurisdiction over a defendant, the Court must resolve a two-step inquiry. First, the court must determine “whether the applicable statute potentially confers jurisdiction by authorizing service of process on the defendant.”[7] The Court applies the forum state's personal jurisdiction rules unless the applicable federal statute “specifically provide[s] for national service of process.”[8] Second, the Court must determine “whether the exercise of jurisdiction comports with due process.”[9]


         The DTSA provides that “the district courts of the United States shall have original jurisdiction of civil actions brought under this section.”[10] The DTSA does not provide nationwide or worldwide service of process.[11] Therefore, the Court will apply Utah's personal jurisdiction rules. Utah's long arm statute supports personal jurisdiction “over nonresident defendants to the fullest extent permitted by the due process clause of the Fourteenth Amendment to the United States Constitution.”[12] Where “the state long arm statute supports personal jurisdiction to the full extent constitutionally permitted, due process principles govern the inquiry.”[13]

         “Due process requires both that the defendant ‘purposefully established minimum contacts within the forum State' and that the ‘assertion of personal jurisdiction would comport with fair play and substantial justice.'”[14] “Depending on their relationship to the plaintiff's cause of action, an out-of-state defendant's contacts with the forum state may give rise to either general (all-purpose) jurisdiction or specific (case-linked) jurisdiction.”[15]

         1. Minimum Contacts

         Defendant argues he does not have sufficient contacts with Utah because: Defendant resides in South East Asia; Defendant's employment activities have been limited to the Asia Pacific region; Defendant's employment contract is with LANDesk Singapore, not Ivanti; and Defendant's Utah contacts are minimal.[16]

         Plaintiffs state the following facts in contradiction to Defendant's assertions. Defendant worked for Plaintiffs and its predecessors, all of which were Utah based, for 13 years. Defendant signed the Agreement with LANDesk Singapore upon Defendant's alleged misrepresentation that he lived in Singapore, but, in fact, Defendant does not live in Singapore and does minimal business in Singapore. Plaintiffs further allege that Defendant's relationship with LANDesk Singapore is merely a “paper” relationship.[17] Notably, the Agreement states that, while Defendant is employed in Singapore, the Company retains the discretion to relocate Defendant “at any time to any location from which the Company and its related corporations may operate.”[18]

         Plaintiffs further allege “Ivanti does not maintain a significant operational presence in Singapore, and its employees, like Shea, . . . ultimately report to and take direction from LANDesk/Ivanti's base in Utah.”[19] Further, the Agreement frequently outlines Defendant's obligations as being owed to the “LANDesk Group, ” which is defined as any related corporations to LANDesk Singapore, not merely to LANDesk Singapore.[20] The Agreement also states that Defendant shall report to Steve Bemis, who is based in Seattle, Washington, not Singapore.[21]

         Regarding Defendant's contacts in Utah, Plaintiffs allege that Defendant is in frequent contact with Plaintiffs' Utah-based headquarters. Plaintiffs' Utah headquarters is home to Plaintiffs' leadership in operations, sales, production, engineering, marketing, human resources and legal. As argued by Plaintiffs, Defendant must have been in frequent contact with these entities in order to perform his job duties effectively. For example, materials and information regarding the products, pricing, and sales strategies employed by Defendant were all developed in Utah and Defendant needed to be in frequent contact with Plaintiffs' headquarters in order to obtain and stay current on this information. In fact, a search of Defendant's work emails from June 2014 to November 2017 showed 1, 047 emails containing the terms “Utah” or “UT.”[22] Other searches revealed thousands of additional emails exchanged between Defendant and various Utah-based employees during the same time period.[23]

         Defendant also participated in bi-weekly telephone conversations with Plaintiffs' Utah-based employees Alex Evans, Ivanti's Product Manager, and Brandon Black, Ivanti's Global Director of Systems & Solutions.[24] During these phone calls, Plaintiffs allege that Defendant received sensitive information about strategy, products, and pricing.[25] Finally, Defendant made a trip to Plaintiffs' headquarters in 2014, 2015, and 2017 for his work duties. Each trip lasted between five and nine days. Plaintiffs argue that the above-listed contacts provides specific jurisdiction over Defendant.[26]

         “The minimum contacts test for specific jurisdiction encompasses two distinct requirements: (i) that the defendant must have ‘purposefully directed its activities at residents of the forum state, ' and (ii) that ‘the plaintiff's injuries must arise out of the defendant's forum-related activities.'”[27]

         Purposeful direction will be found “where the defendant deliberately has engaged in significant activities within a State, or has created continuing obligations between himself and residents of the forum.”[28] “Due process requires that a defendant be haled into court in a forum State based on his own affiliation with the State, not based on the “random, fortuitous, or attenuated” contacts he makes by interacting with other persons affiliated with the State.”[29]

         The Tenth Circuit recently enumerated three instances where an out-of-state defendant's activities may arise to purposeful direction: “(1) continuing relationships with forum state residents (‘continuing relationships'); (2) deliberate exploitation of the forum state market (‘market exploitation'); and (3) harmful effects in the forum state (‘harmful effects').”[30]

         First, under the “continuing relationships” framework, purposeful direction may be found where a defendant “purposefully reached out beyond their State and into another by, for example, entering a contractual relationship that ‘envisioned continuing and wide-reaching contacts' in the forum state.'”[31] The “defendant's solicitations of or direct communications with forum state residents provide ‘some evidence' suggesting purposeful direction.”[32]

         Second, “[a]n out-of-state defendant's ‘continuous exploitation of the forum state market' may also satisfy the purposeful direction requirement.”[33] This framework has been employed by courts where the defendant is alleged to have actively solicited business, online or otherwise, from a specific state.

         Finally, under the third framework, purposeful direction may be established, “when an out-of-state defendant's intentional conduct targets and has substantial harmful effects in the forum state.”[34] Importantly, under this framework, “the plaintiff cannot be the only link between the defendant and the forum”[35] Further, the “mere injury to a forum resident is not a sufficient connection to the forum.”[36] Instead, “[t]he proper question is . . . whether the defendant's conduct connects him to the forum in a meaningful way.”[37]

         Plaintiffs' arguments that Defendant purposefully directed his activities at Utah are most closely in line with this third “harmful effects” framework. This framework reflects the Supreme Court's decision in Calder v. Jones.[38] In Calder, the plaintiff, a professional entertainer who resided and worked in California, brought a libel suit against the National Enquirer, Inc., and several of its employees. The “allegedly libelous story concerned the California activities of a California resident, ” was “drawn from Californian sources, and the brunt of the harm . . . was suffered in California.”[39] As a result, the Supreme Court held that jurisdiction was “proper in California based on the ‘effects' of [the defendants'] Florida conduct in California.”[40] In Dudnikov v. Chalk & Vermillion Fine Arts, Inc., [41] the Tenth Circuit enumerated a three-part test, in light of the Supreme Courts' Calder decision, requiring a finding of “(a) an intentional action . . ., that was (b) expressly aimed at the forum state . . ., with (c) knowledge that the brunt of the injury would be felt in the forum state.”[42]

         The Court finds Defendant's actions meet these requirements. First, Plaintiffs have alleged that Defendant misappropriated its trade secrets in violation of the DTSA. Such action, if true, is purposeful. Second, Defendant acquired these alleged trade secrets through his frequent contacts in Utah. He must have understood that the sensitive information was developed in Utah for the benefit of the Utah company. Given his close relationship with Plaintiffs' headquarters in Utah, Defendant also must have known the harm of the alleged appropriation would be felt in Utah. Therefore, the Calder test is met. Similar to the defendant in Calder, the alleged misappropriation concerned information created in Utah, by a Utah-based company, and was obtained as a result of Defendant's relationship with Utah-based employees. Further, the brunt of the injury from the misappropriation of the trade secrets is felt primarily in Utah. Therefore, jurisdiction is proper in Utah based on the effects of Defendant's conduct in Utah.

         Defendant argues that the Supreme Court and the Tenth Circuit have more recently recognized a more “restrictive” approach to Calder. Defendant is correct that controlling case law has more recently recognized that “the Calder effects test requires showing more than simply harm suffered by a plaintiff who resides in the forum state.”[43] “The proper question is not where the plaintiff experienced a particular injury effect but whether the defendant's conduct connects him to the forum in a meaningful way.”[44]

         Even under the more restrictive view, Plaintiffs have alleged facts supporting that Defendant purposefully directed his activities at Utah. The alleged offending conduct arises from Defendant's frequent contacts with Plaintiffs' headquarters in Utah. As a result of these Utah-based contacts, Defendant obtained sensitive information over years of employment. Upon leaving his employment with the Utah-based company, Defendant allegedly misappropriated this sensitive information for the benefit of himself and Plaintiffs' direct competitor, fully aware that such conduct would directly harm Plaintiffs' Utah-based business. Such conduct certainly connects Defendant to Utah “in a meaningful way.”

         Defendant argues that this case is more analogous to Shrader v. Biddinger, wherein the Tenth Circuit found jurisdiction was not proper. The plaintiff in Shrader sought to bring suit in Oklahoma against out-of-state defendants. The suit concerned the posting and sending of an allegedly defamatory email. The Tenth Circuit found no purposeful direction where: “Oklahoma was not the focal point of the email posted . . ., either in terms of its audience or its content”[45]the email concerned work that was “marketed and sold worldwide through the internet, ” and not associated with Oklahoma;[46] the plaintiff's “professional reputation in the trading community was not tied to Oklahoma, as Ms. Jones's was to the California entertainment industry in Calder;”[47] and the email was not received by a single person residing in Oklahoma.[48] The only facts supporting jurisdiction was that plaintiff resided and produced his work in Oklahoma. Shrader is easily distinguishable from the case at bar. The attenuated relationship between the Shrader defendants and Okalahoma is far less significant than the involved relationship between Defendant with the Utah-based Plaintiffs.

         Having found that Defendant purposefully directed his activities to Utah, the Court must next determine whether Plaintiffs' injuries arise out of Defendant's forum-related activities. As stated, Plaintiffs allege they are injured by Defendant's misappropriation of their trade secrets. Defendant acquired Plaintiffs' alleged trade secrets over the years he worked for Plaintiffs and through his regular contact and exchange with Plaintiffs' employees in Utah. Therefore, the alleged injuries arise out of Defendant's forum-related activities and Plaintiffs have shown Defendant has sufficient minimum contacts with Utah to allow this Court to exercise jurisdiction, assuming exercising jurisdiction comports with due process.

         2. Due Process Under The Fourteenth Amendment

         Having decided Defendant has sufficient minimum contacts with Utah, the Court must next consider whether exercising jurisdiction offends “traditional notions of fair play and substantial justice”[49] under the Fourteenth Amendment. In determining whether exercise of jurisdiction is so unreasonable as to violate “fair play and substantial justice, ” the Court considers:

(1) the burden on the defendant, (2) the forum state's interest in resolving the dispute, (3) the plaintiff's interest in receiving convenient and effective relief, (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of the several states in furthering fundamental substantive social policies.[50]

         When a court determines the reasonableness of asserting jurisdiction, the court also considers its minimum contacts determination. “When minimum contacts have been established, often the interests of the plaintiff and the forum in the exercise of jurisdiction will justify even the serious burdens placed on the alien defendant.”[51]

         In considering all the factors, the Court finds that exercising jurisdiction would not violate fair play and substantial justice. As argued by Defendant, the burden on Defendant in litigating the matter in Utah while residing in Thailand is significant. However, Defendant has shown the willingness and ability to travel to the United States, both for business and personal reasons. Moreover, Utah has a significant interest in protecting its businesses as well as its business' trade secrets. ...

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