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KDH Electronic Systems, Inc. v. Curtis Technology Ltd.

March 19, 2010

KDH ELECTRONIC SYSTEMS, INC., ET AL.
v.
CURTIS TECHNOLOGY LTD., ET AL.



The opinion of the court was delivered by: McLaughlin, J.

MEMORANDUM AND ORDER

This case involves a dispute over a contract between plaintiffs KDH Electronics, Inc., and KDH Defense Systems, Inc. (collectively, "KDH"), and the defendant Curtis Technology Ltd. ("CTL"). The other defendants, Dr. Thomas E. Curtis and Michael L. Curtis, are directors of CTL. The parties entered into a Teaming Agreement (the "Agreement") in April of 2006. The Agreement outlines the roles played by each party in the design, testing, and manufacture of a radar system known as the T-3 System. Under the Agreement, the plaintiffs were responsible for preparing funding proposals and marketing the T-3 System, and the defendants assumed the role of technical researcher, designer and developer. The plaintiffs allege that the defendants breached the Agreement and committed several torts in relation to that breach.

Thomas E. Curtis and Michael J. Curtis move to dismiss the plaintiffs' claims for lack of personal jurisdiction. In the alternative, they move to dismiss the plaintiffs' breach of contract claims for failure to state a claim upon which relief may be granted. The plaintiffs argue that the defendants waived their personal jurisdiction defense by not asserting it sooner in the litigation. The plaintiffs also argue that the both Thomas and Michael Curtis have the minimum contacts with Pennsylvania necessary for jurisdiction and that the plaintiffs have adequately stated a claim for breach of contract against Thomas and Michael Curtis.

The Court grants the defendants' motion to dismiss for lack of personal jurisdiction as to defendant Michael Curtis. The Court, however, denies the motion as to defendant Thomas Curtis. The Court also denies the defendants' motion to dismiss the plaintiffs' breach of contract claim against Thomas Curtis without prejudice.

I. Allegations of the Complaint

KDH Electronic Systems, Inc., and KDH Defense Systems, Inc., are contractors who design, manufacture and supply military equipment, radar systems, naval maintenance systems and force protection systems. CTL is in the business of sonar engineering. Both KDH Electronic Systems, Inc., and KDH Defense Systems, Inc., are Pennsylvania corporations. CTL is a United Kingdom limited corporation, and Thomas and Michael Curtis are citizens of the United Kingdom.

KDH enlisted the defendants' consulting services to assist in the development of the T-3 System, a swimmer detection sonar system. Their relationship was formalized in several agreements. The last of these was the Agreement, which the parties executed for the purposes of developing the T-3 System. See Compl., Ex. B. The Agreement provided, among other things, that all developments related to the T-3 System were to be maintained in the strictest confidence. It also prohibited the parties from consulting for, financing, owning, or managing any competitive business and prohibited the defendants from entering into any contracts with third-parties that would conflict with their obligations under the Agreement.

The complaint alleges that the defendants failed to meet their obligations under the Agreement, including refusing to provide information to KDH when requested, failing to deliver and test the T-3 System on a number of occasions, and failing to meet critical deadlines. The complaint also alleges that the defendants attempted to undermine the Agreement by filing a patent in the United Kingdom asserting the defendants' ownership over the T-3 System. It also alleges that the defendants violated the Agreement's confidentiality clause and restrictive covenants by providing information to KDH's competitors about the T-3 System and by soliciting contracts from customers and competitors of KDH for the sale of the T-3 System.

The complaint brings claims of breach of contract, common law unfair competition, conversion, and violations of the Pennsylvania Uniform Trade Secrets Act. As relief, the complaint requests a preliminary injunction, specific performance and damages.

II. Jurisdictional Facts

The Court finds the following undisputed facts, as presented in the affidavits of Thomas Curtis and Michael Curtis and the affidavit of KDH's president, Dave Herbener.

Thomas Curtis is a director of CTL, and Michael Curtis is a director and employee of CTL. CTL was approached by a representative of KDH in February of 2005 to discuss the development of an underwater swimmer detection system. Mr. Herbener and Thomas Curtis then developed a relationship through phone conversations in which they discussed the market and technology behind developing such a swimmer detection system. After forming confidentiality and consulting agreements with KDH, Thomas and Michael Curtis traveled to Norfolk, Virginia, in December of 2005 to participate in a meeting to discuss the proposed system with KDH and various military and Department of Defense attendants. This trip was both Thomas and Michael Curtis's first and only visit to the United States, and neither defendant has ever visited Pennsylvania.

KDH and CTL entered into the Agreement for the purpose of developing and manufacturing the T-3 System on or about April 5, 2006. The Agreement provided that the United States District Court, Eastern District of Pennsylvania, has jurisdiction over any disputes arising out of the Agreement.*fn1 Thomas Curtis signed the Agreement with KDH on March 28, 2006, in his capacity as a director of CTL only. Michael Curtis was not involved in negotiations for the Agreement and was not aware of the existence of the Agreement until January 2007. From the formation of the Agreement through May 2008, Thomas Curtis directed telephone calls, letters, emails and faxes to Mr. Herbener at KDH's corporate headquarters in Pennsylvania.

Mr. Herberner's affidavit also contains allegations about Thomas and Michael Curtis's participation in the alleged breach of the Agreement that are not based upon Mr. Herbener's personal knowledge. The Court treats these allegations in the same manner as it would treat allegations in a complaint.

Specifically, Mr. Herbener states the he "became aware" that Thomas Curtis had committed the following violations of the Agreement's restrictive covenants: (1) that Thomas Curtis was storing the T-3 prototype at facilities owned by a KDH competitor; (2) that Thomas Curtis approached a representative of the United States Navy and requested that he work directly with CTL on the T-3 Systems; (3) that Thomas Curtis was having discussions with a member of the United Kingdom Navy regarding the T-3 System; (4) that Thomas Curtis had entered into a non-disclosure agreement regarding the T-3 system with one of KDH's competitors; (5) that Thomas Curtis tested the T-3 System at facilities owned by one of KDH's competitors; (6) that Thomas Curtis was attempting and eventually did enter into agreements to provide a sonar signaling process system to one of KDH's competitors; and (7) that Thomas Curtis had filed a U.K. patent application for the T-3 System, naming only himself as owner and inventor. Herbener Decl. at ¶ 11(a)-(g). Mr. Herbener also makes the blanket allegation that, "[u]pon information and belief, Michael Curtis was also involved in such actions." Id.

III. Analysis

Because it presents a threshold issue, the Court will first decide the defendants' motion to dismiss for lack of personal jurisdiction. Because the Court finds that it has personal jurisdiction over Thomas Curtis, the Court then considers the defendant's motion to ...


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