INTERA CORPORATION, et al., Plaintiffs-Appellants, v. GEORGE HENDERSON III, et al., Defendants-Appellees.
No. 04-6081
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
Decided and Filed: November 10, 2005
RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206. File Name: 05a0439p.06. Appeal from the United States District Court for the Middle District of Tennessee at Nashville. No. 03-00755—Robert L. Echols, Chief District Judge. Argued: July 28, 2005.
Before: SILER and DAUGHTREY, Circuit Judges; MARBLEY, District Judge.*
ARGUED: William Kennerly Burger, BURGER, SISKIN, SCOTT & McFARLIN, Murfreesboro, Tennessee, for Appellants. Barry Goheen, KING & SPALDING, Atlanta, Georgia, for Appellees. ON BRIEF: William Kennerly Burger, BURGER, SISKIN, SCOTT & McFARLIN, Murfreesboro, Tennessee, for Appellants. Barry Goheen, KING & SPALDING, Atlanta, Georgia, Thor Y. Urness, BOULT, CUMMINGS, CONNERS & BERRY, Nashville, Tennessee, for Appellees.
OPINION
ALGENON L. MARBLEY, District Judge. Plaintiffs-Appellants (“Plaintiffs“) Intera Corporation and Intera Technologies (sometimes collectively referred to as “Intera“) appeal the district court‘s dismissal of their lawsuit against Defendants-Appellees (“Defendants“) George Henderson, III, John Englar, and Nano-Tex, Inc (hereinafter “Nano-Tex“) for lack of personal jurisdiction with prejudice. Intera sued Henderson, Englar, and Nano-Tex for misappropriation of trade secrets, technology, and “know how,” in violation of Tennessee‘s version of the Uniform Trade Secrets Act (codified as amended at
BACKGROUND
Plaintiffs are Tennessee corporations engaged in the industry of textile development and promotion. Their business includes the development of trade secrets, technology, and specialized “know how.” Henderson and Englar are not residents of Tennessee, and Nano-Tex is not a Tennessee corporation.
In 1992, Intera and Burlington Knitted Fabrics, Inc. (“Burlington Fabrics“), a division of Burlington Industries, Inc. (“Burlington Industries“) entered into a written license agreement. The following year, Intera and Burlington Woven, another division of Burlington Industries, entered into a license agreement, which provided for the confidential use and application of Intera‘s specialized fabric treatment processes. The license agreement between Intera and Burlington Woven contained a choice-of-law provision, which provided that all disputes arising under the agreement would be decided by Tennessee law, in a Tennessee forum. Additionally, Burlington Industries’ employees with access to Intera‘s technology were required to provide “confidentiality assurances” to protect Intera‘s know how from disclosure to competitors and other unauthorized persons. At the time Intera entered into the license agreements, Henderson served as Burlington Industries’ chief operating officer, and Englar served as Burlington Industries’ vice president, and thus, they were required to keep their knowledge of Intera‘s technology confidential.
In the late 1990s, Intera invited Burlington Industries to enter into a joint venture for the purpose of further developing Intera‘s technology. This was consistent with the terms of the existing license agreement that Intera had entered into with Burlington Woven. Thereafter, Intera disclosed a confidential business plan to Burlington Industries. According to Intera, at some point in the late 1990s, Henderson and Englar colluded to adopt and to expand the technology that Intera had confidentially licensed to Burlington Industries and its various divisions.
In August 2000, John Maier, Burlington Industries’ intellectual property counsel, informed Intera that Burlington Industries was considering the use of similar technology from Nano-Tex, one of Intera‘s competitors. Paragraph 2.2 of the license agreement between Intera and Burlington Woven requires Burlington Industries to provide Intera with ninety days’ written notice sent via certified mail if the company “ever developed any interest in adopting or utilizing similar technology from any other source. . . .” Henderson and Englar created Nano-Tex, and at some point postcreation, Burlington Industries became the majority shareholder and parent company of Nano-Tex. Henderson and Englar remained corporate officers of Burlington Industries while at the same time serving as principal officers and stockholders of Nano-Tex, thus providing them with the opportunity to divert Intera‘s customers to Nano-Tex. Intera tested Nano-Tex‘s fabric and discovered that the fabric exhibited many properties of Intera‘s technological innovations and know-how. Accordingly, Intera alleges that Nano-Tex developed a directly competitive textile application, in which it used Intera‘s technology to benefit Henderson, Englar, and others.
On August 21, 2002, Plaintiffs filed suit against Defendants alleging misappropriation of trade secrets, technology, and know how “related to the testing of moisture-absorbing and/or moisture-transporting fabrics” under Tennessee‘s version of the Uniform Trade Secrets Act. In their suit, Plaintiffs also alleged several other state law claims against the Defendants including the
The district court noted that the parties disputed the court‘s personal jurisdiction over Defendants, but exercised subject matter jurisdiction based on diversity of citizenship pursuant to
ANALYSIS
I. The Jurisdiction of this Court to Review the District Court‘s Dismissal of Plaintiffs’ Case for Lack of Personal Jurisdiction
As a threshold matter, the Defendants challenge this Court‘s jurisdiction to review the district court‘s dismissal of the Plaintiffs’ case for lack of personal jurisdiction on the grounds that Plaintiffs filed a defective
A. The Effect of a Defective Rule 59 Motion on the Tolling of the Thirty-Day Period for Filing a Timely Appeal
A party who files a
This Court, however, has not yet considered
In the Seventh Circuit, “particularity” has been interpreted to mean “reasonable specification.” Talano v. Northwestern Med. Faculty Found., Inc., 273 F.3d 757, 760 (7th Cir. 2001) (quoting Martinez v. Trainor, 556 F.2d 818, 819-20 (7th Cir. 1977)). In Talano, the court held that the plaintiff‘s
In the Third Circuit,
Finally, the particularity requirement of
Every motion that may require the resolution of an issue of law, in either civil or criminal cases, when filed shall be accompanied by a memorandum of law citing supporting authorities. . . . The memorandum submitted in support of a motion shall contain at the outset a short and concise statement of the factual and legal issues which justify the grant of the relief sought.
B. Whether Plaintiffs Filed a “Defective” Rule 59(e) Motion
Defendants claim that Plaintiffs’
Plaintiffs respond that their
This Court agrees that Plaintiffs’ motion meets – albeit barely – the requirements of
Finally, under
Accordingly, Plaintiffs did not file a defective
II. Whether the District Court Erred in Dismissing Plaintiffs’ Case for Lack of Personal Jurisdiction
A. Standard of Review
We review a district court‘s dismissal for lack of personal jurisdiction de novo. Calphalon Corp. v. Rowlette, 228 F.3d 718, 721 (6th Cir. 2000). If the district court, as in the instant action, did not conduct an evidentiary hearing, we must review the pleadings and affidavits in the light most favorable to Plaintiffs, without considering the “controverting” assertions of the Defendants.7 Id.
As a threshold matter, Plaintiffs do not challenge the determinations the district court made with respect to its lack of personal jurisdiction over Nano-Tex. The district court held that it lacked personal jurisdiction over Nano-Tex because Plaintiffs: (1) did not allege facts intimating that Nano-Tex has any “apparent” contacts with Tennessee; (2) failed to establish that Nano-Tex is the alter-ego of Henderson and Englar such that the company has no personality separate from Henderson and Englar; (3) failed to establish that Nano-Tex exercised any control over its parent company, Burlington Industries; and (4) provided no evidence that Nano-Tex and Burlington Industries are not separate entities. Intera Corp. v. Henderson, No. 3:03-0755, slip op. at 19-21 (M.D. Tenn. May 26, 2004). Because Plaintiffs failed to raise any issues as to the district court‘s jurisdictional findings regarding Nano-Tex, they have abandoned the issue of whether the district court had personal jurisdiction over the company. Sommer v. Davis, 317 F.3d 686, 691 (6th Cir. 2003) (holding that an issue is abandoned if a party does not present any argument respecting the issue in his brief).
1. “General” v. “Specific” Personal Jurisdiction
The plaintiff bears the burden of making a prima facie showing of the court‘s personal jurisdiction over the defendant. Id.; Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991). Personal jurisdiction may be either “general” or “specific.” Bird v. Parsons, 289 F.3d 865, 873 (6th Cir. 2002). General jurisdiction exists when a defendant‘s “contacts with the forum state are of such a continuous and systematic nature that the state may exercise personal jurisdiction over the defendant even if the action is unrelated to the defendant‘s contacts with the state.” Id. (citing Third Nat‘l Bank in Nashville v. WEDGE Group, Inc., 882 F.2d 1087, 1089 (6th Cir. 1989)). In the present action, the district court held that although Plaintiffs have not conceded that the court lacks general jurisdiction over Defendants, they predicated their prima facie case of personal jurisdiction on specific jurisdiction. Intera Corp., No. 3:03-0755, at 10. Plaintiffs do not challenge this finding on appeal. Therefore, we limit our personal jurisdiction analysis to a discussion of specific jurisdiction.
An exercise of specific jurisdiction is proper where the claims in the case arise from or are related to the defendant‘s contacts with the forum state. Kerry Steel, Inc. v. Paragon Indus., Inc., 106 F.3d 147, 149 (6th Cir. 1997). In Southern Machine Company v. Mohasco Industries, Inc., we promulgated a three-prong test that not only guides the determination of whether specific jurisdiction exists, but also protects the due process rights of a defendant. S. Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968). The Southern Machine test provides:
First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant‘s activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.
Id.
In a diversity action, the law of the forum state dictates whether personal jurisdiction exists, subject to constitutional limitations. Calphalon Corp., 228 F.3d at 721; Reynolds v. Int‘l Amateur Athletic Fed‘n, 23 F.3d 1110, 1115 (6th Cir. 1994). A court‘s exercise of personal jurisdiction over a nonresident defendant is appropriate only if it meets the state‘s long-arm statute and constitutional due process requirements. Calphalon Corp., 228 F.3d at 721. Furthermore, the Court‘s exercise of jurisdiction comports with due process when the defendant has sufficient minimal contacts such that “‘traditional notions of fair play and substantial justice’ are not offended.” Neal v. Janssen, 270 F.3d 328, 331 (6th Cir. 2001) (quoting Int‘l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). In the case sub judice, the Tennessee long-arm statute provides the relevant governing state statute, which assists a court in determining whether any action or claim for relief arises from a nonresident defendant‘s conduct within the state. Tennessee‘s long-arm statute pertains to: “the transaction of any business within the state“; “any tortious act or omission within this state“; “the ownership or possession of any interest in property located within this state“; or “entering into a contract for services to be rendered or for materials to be furnished in this state.”
Tennessee‘s long-arm statute has been interpreted to be “coterminous with the limits on personal jurisdiction imposed” by the Due Process Clause of the United States Constitution, and thus, “the jurisdictional limits of Tennessee law and of federal constitutional law of due process are identical.” Payne v. Motorists’ Mut. Ins. Cos., 4 F.3d 452, 455 (6th Cir. 1993). See also Aristech Chem. Int‘l v. Acrylic Fabricators, 138 F.3d 624, 627 (6th Cir. 1998) (“[W]hen a state‘s long-arm statute reaches as far as the limits of the Due Process Clause, the two inquiries merge and the court ‘need only determine whether the assertion of personal jurisdiction . . . violates constitutional due process.‘“) (quoting Nationwide Mut. Ins. Co. v. Tryg Int‘l Ins. Co., 91 F.3d 790, 793 (6th Cir. 1996)).
3. Purposeful Availment
This Court views the purposeful availment prong of the Southern Machine test as “essential” to a finding of personal jurisdiction. Calphalon Corp., 228 F.3d at 722 (citing LAK, Inc. v. Deer Creek Enters., 885 F.2d 1293, 1300 (6th Cir. 1989)). The purposeful availment requirement serves to protect a defendant from being haled into a jurisdiction by virtue of “random,” “fortuitous,” or “attenuated” contacts. Id. (citations omitted). We have held previously that purposeful availment may exist when a defendant makes telephone calls and sends facsimiles into the forum state and such communications “form the bases for the action.” Neal, 270 F.3d at 332. In a similar vein, we have held that the “actual content” of the communications into the forum state that give rise to an intentional tort action may constitute purposeful availment. Id.
Finally, because of Henderson‘s and Englar‘s status as corporate officers of Burlington Industries and Nano-Tex, it is essential to note that “where an out-of-state agent is actively and personally involved in the conduct giving rise to the claim, the exercise of personal jurisdiction should depend on traditional notions of fair play and substantial justice; i.e., whether [the agent] purposely availed [himself] of the forum and the reasonably foreseeable consequences of that availment.” Balance Dynamics Corp. v. Schmitt Indus., Inc., 204 F.3d 683, 698 (6th Cir. 2000) (citations omitted).
Plaintiffs concede that Defendants Henderson and Englar are not residents of Tennessee. They also admit that Henderson and Englar did not engage in any of the alleged deceptive actions within Tennessee. Additionally, Plaintiffs do not allege facts suggesting that Henderson and Englar
Instead, Plaintiffs argue that Henderson and Englar have purposely availed themselves of the forum state because (1) they used the license agreement between Intera and Burlington Woven as the vehicle through which they obtained Intera‘s “know how,” which (2) they in turn appropriated to their use and benefit, and (3) they knew the license agreement provides for a Tennessee jurisdictional forum for disputes arising from the agreement and it requires Burlington Industries’ employees who have access to Intera‘s “know how” and technology to keep the information confidential. Plaintiffs, however, do not explain why Henderson‘s and Englar‘s knowledge of the choice-of-law provision in the license agreement between Intera and Burlington Woven demonstrates that they deliberately affiliated themselves with Tennessee, or that Henderson and Englar could reasonably expect to become embroiled in possible litigation in Tennessee. See Calphalon Corp., 228 F.3d at 723 (stating that “even though [the defendant] was on notice that the contract was to be governed by Ohio law, it did not make deliberate affiliation with that state nor could it reasonably foresee possible litigation there“). We reached this conclusion in Calphalon notwithstanding the fact that the defendant in that case was an actual party to the contract in dispute. Id. at 720. In the present action, neither Henderson nor Englar was a party to the license agreement between Intera and Burlington Woven.
Moreover, while Plaintiffs argue that Henderson and Englar purposefully availed themselves of the forum state by engaging in fraudulent or conspiratorial conduct outside of Tennessee, which would have reasonably foreseeable consequences in the state, we decline to decide this argument because it was not presented to the district court. See Elkins v. Richardson-Merrell, Inc., 8 F.3d 1068, 1072 (6th Cir. 1993) (holding that “this court does not normally address issues raised for the first time on appeal“) (internal quotation marks and citations omitted).
Plaintiffs also proffer letter correspondence between James E. Klopman, Intera Corporation‘s Vice President of Marketing, and Defendant Henderson, in which Henderson expressed his gratitude to Klopman for sending a knit shirt to him. Yet, Henderson did not send the letter to or from Tennessee. Finally, Plaintiffs do not allege that Henderson and Englar made telephone calls, or sent facsimiles to Tennessee which “form the bases” for the action pending before this Court. Neal, 270 F.3d at 332.
Based upon the foregoing, we hold that the district court did not err when it concluded that Defendants Henderson and Englar did not purposefully avail themselves of the privilege of acting in Tennessee.
4. Arising From
We have held that the “arising from” prong of the Southern Machine test is satisfied “when the operative facts of the controversy arise from the defendant‘s contacts with the state.” Calphalon, 228 F.3d at 723. Furthermore, in analyzing the second prong of the Southern Machine test, this Court has previously held that “physical presence is not the touchstone of personal jurisdiction,” and hence, personal jurisdiction may exist over a defendant although he is not physically present in the forum if he “purposefully directs communications into the forum, and those communications form the ‘heart’ of the cause of action.” Neal, 270 F.3d at 333.
In this case, Plaintiffs have presented no facts suggesting that Defendants Henderson and Englar have had contact with Tennessee either in a personal or an official capacity as corporate officers. Even accepting as true Plaintiffs’ contention that the implementation of the license agreement between Intera and Burlington Woven required Burlington Industries’ officers and representatives to have “substantial and regular” contact with Intera, Plaintiffs do not assert facts tending to show that Henderson and Englar had such contact with Intera in Tennessee.
5. Reasonableness
If prongs one and two of Southern Machine test are satisfied, then there is an inference that the reasonableness prong is satisfied as well. CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1268 (6th Cir. 1996) (citing Am. Greetings Corp. v. Cohn, 839 F.2d 1164, 1170 (6th Cir. 1988)). Because we find that Plaintiffs have failed to satisfy the “purposeful availment” and “arising from” requirements of the Southern Machine test, an inference of reasonableness is not warranted in this case.
The third prong of the Southern Machine test mandates that “the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.” See Youn v. Track, Inc., 324 F.3d 409, 419 (6th Cir. 2003) (citation omitted). Generally, when considering whether it is reasonable to exercise personal jurisdiction over a nonresident defendant, a court must consider several factors including the following: (1) the burden on the defendant; (2) the interest of the forum state; (3) the plaintiff‘s interest in obtaining relief; and (4) other states’ interest in securing the most efficient resolution of the controversy. Patterson, 89 F.3d at 1268. First, Defendants Henderson and Englar would be substantially burdened if they were compelled to litigate this case in Tennessee given the fact that neither defendant resides in the state. Yet, we have deemed specific jurisdiction to be proper even when a defendant would be compelled to travel. See Youn, 324 F.3d at 420 (citing Lanier v. Am. Bd. of Endodontics, 843 F.2d 901, 911-12 (6th Cir. 1988) (permitting personal jurisdiction in Michigan over Illinois defendant); Cohn, 839 F.2d at 1170-71 (upholding personal jurisdiction in Ohio over California defendant)).
Second, Tennessee would have a strong interest in exercising jurisdiction over Henderson and Englar because Plaintiffs are resident corporations of the state of Tennessee, which would have an interest in “protecting its residents’ legal options.” Youn, 324 F.3d at 419. Nevertheless, Plaintiffs’ concession that Defendants Henderson and Englar did not commit their alleged deceptive acts within the geographical confines of Tennessee appears to diminish the state‘s purported strong interest. Furthermore, the choice-of-law provision of the license agreement between Intera and Burlington Woven which provides that all disputes arising under the agreement would be decided by Tennessee law, in a Tennessee forum, does not confer an interest upon Tennessee in this case. The existence of a choice-of-law provision, standing alone, is insufficient to establish jurisdiction, but such a provision may “reinforce [a] deliberate affiliation with the forum State and the reasonable foreseeability of possible litigation there.” Calphalon Corp., 228 F.3d at 723 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 482 (1985)). In the present action, Defendants were not parties to the Intera-Burlington Woven license agreement, and consequently, neither defendant could have reasonably expected to be haled into a Tennessee court.
Third, Plaintiffs have a substantial interest in obtaining relief. Fourth, given the fact that Defendants claim to be residents of North Carolina where they were employed as corporate officers of Burlington Industries and Nano-Tex, and Plaintiffs admit that Henderson and Englar did not engage in fraudulent acts within the state of Tennessee, it appears that the state of North Carolina may have a strong interest in resolving this controversy.
For the foregoing reasons, we conclude that it would not be reasonable for a Tennessee court to exercise personal jurisdiction over Defendants Henderson and Englar because Henderson and Englar do not have a substantial enough connection with the forum state. Because we hold that Plaintiffs have failed to establish all three prongs of the Southern Machine test for specific
III. Whether Appellants Abandoned Their Appeal of the District Court‘s Denial of the FED. R. CIV. P. 59(e) Motion
Defendants argue that Plaintiffs have abandoned their appeal from the district court‘s denial of their
Contrary to Defendants’ assertion, Plaintiffs have not abandoned their appeal of the district court‘s denial of their
Accordingly, Plaintiffs have not abandoned their
IV. Whether the District Court Erred When it Denied Plaintiffs’ FED. R. CIV. P. 59(e) Motion
A. Standard of Review
Generally, we review a denial of a
B. The District Court‘s Order Denying Plaintiffs’ Motion
In Plaintiffs’
A court may grant a
Our reasons in support of this conclusion are two-fold. First, our conclusion is entirely consistent with the language of
Second, in declaring that a dismissal for lack of jurisdiction does not “operate[] as an adjudication upon the merits,”
[M]erely because one court does not have jurisdiction over a dispute does not necessarily mean that another court is precluded from properly exercising jurisdiction over the matter. Moreover, if a court does not have jurisdiction over a matter, it cannot properly reach the merits of the case.
Id. (quoting Wilkins v. Jakeway, 183 F.3d 528, 533 n.6 (6th Cir. 1999)).
By logical extension, our rationale in Pratt applies with equal force to the personal jurisdiction context. Although Tennessee courts lack personal jurisdiction over Defendants Henderson and Englar, this does not lead to the inexorable conclusion that no court has personal jurisdiction over these defendants. Furthermore, upon a determination that personal jurisdiction is lacking, a court should not dismiss a case on the merits, especially when it appears that another court with appropriate jurisdiction may resolve the issues between the parties. In this case, because Henderson and Englar are residents of North Carolina, and many, if not all, of the alleged deceptive actions may have occurred in that state, the courts of North Carolina may be able to address Plaintiffs’ claims against Defendants.
Finally, in reaching our holding, we do not place our imprimatur on vague or ambiguously worded petitions for
For the foregoing reasons, we AFFIRM the district court‘s dismissal of Plaintiffs’ case for lack of personal jurisdiction, and we REVERSE the district court‘s “with prejudice” dismissal and REMAND for a judgment entry of case dismissal “without prejudice.”