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Cabot Corporation v. Niotan

September 30, 2011

CABOT CORPORATION, PLAINTIFF
v.
NIOTAN, INC., DEFENDANT



The opinion of the court was delivered by: James Knoll Gardner, United States District Judge

OPINION

This matter is before the court on Defendant Niotan, Inc.'s Motion to Dismiss for Lack of Personal Jurisdiction or Improper Venue or, in the Alternative, Motion to Transfer Venue to U.S. District Court for the District of Nevada, which motion was filed September 29, 2008. Cabot's Opposition to Niotan's Motion to Dismiss for Lack of Personal Jurisdiction or Improper Venue or, in the Alternative, Motion to Transfer was filed October 14, 2008. A hearing on defendant's motion was conducted on April 20, May 15, 26 and 27, 2009. Closing arguments were conducted on July 15, 2009. For the following reasons, I deny defendant's motion to dismiss but grant defendant's alternative motion to transfer this matter to the United States District Court for the District of Nevada.

Specifically, I conclude that plaintiff has not produced sufficient proof, by a preponderance of the evidence, to permit the exercise of personal jurisdiction over out-of-state defendant Niotan, Inc., pursuant to the Commonwealth of Pennsylvania's Long Arm statute. In addition, even though this court may not constitutionally assert personal jurisdiction over defendant, I exercise the discretion granted pursuant to 28 U.S.C. §§ 1406(a) and 1631 to transfer this matter to the District of Nevada.

JURISDICTION AND VENUE

Jurisdiction in this case is based upon diversity of citizenship pursuant to 28 U.S.C. § 1332. Venue is alleged to be proper pursuant to 28 U.S.C. § 1391 because the events giving rise to plaintiff's claims allegedly occurred in Berks County, Pennsylvania, which is in this judicial district.

PLAINTIFF'S COMPLAINT

On April 9, 2008 plaintiff Cabot Corporation filed a six-count Complaint against defendant Niotan, Inc. alleging the following causes of action: (Count I) misappropriation of trade secrets; (Count II) tortious interference with contractual relations; (Count III) conversion; (Count IV) aiding and abetting the breach of fiduciary duties; (Count V) unfair competition and unfair and deceptive trade practices; and (Count VI) unjust enrichment.

Plaintiff Cabot Corporation is a Delaware corporation with its principal place of business in the Commonwealth of Massachusetts. Defendant Niotan, Inc. is a privately-held Nevada corporation with its principal place of business in the State of Nevada.

In its Complaint, plaintiff contends that it has various processes, methods, techniques and other information relating to the production of tantalum powder and related products. Plaintiff asserts that many of its processes, methods and techniques are not generally known or readily ascertainable by anyone but plaintiff. Plaintiff further asserts that it derives great economic value by having kept and continuing to keep secret these processes, methods and techniques. In addition, plaintiff avers that it has made numerous efforts to maintain the secrecy of its information.

Plaintiff contends that defendant has been recruiting its former employees and consultants who all owe a duty of confidentiality to plaintiff regarding information learned while working for or with plaintiff. Moreover, plaintiff asserts that these former employees and consultants have shared information with defendant about the various processes, methods, techniques and other information relating to the production of tantalum powder and related products.

CONTENTIONS OF THE PARTIES

Defendant's Contentions

Defendant Niotan, Inc. asserts that this court lacks personal jurisdiction over it and that the Eastern District of Pennsylvania is not a proper venue for this diversity action. Thus, defendant argues that I should dismiss plaintiffs' Complaint for lack of jurisdiction or improper venue. In the alternative, defendant asserts that this case should be transferred to the United States District Court for the District of Nevada.

Defendant contends that it has not at any time pertinent to this matter done any of the following acts:

1. incorporate in Pennsylvania;

2. maintain its principal place of business, a business office, a mailing address, a telephone listing or an agent for service of process in Pennsylvania;

3. employ employees or engage consultants to perform work in Pennsylvania;

4. register to do business in Pennsylvania;

5. conduct advertising, produce sales or have customers in Pennsylvania;

6. file administrative reports with any agency or department of the Commonwealth of Pennsylvania;

7. pay taxes in Pennsylvania;

8. own, lease, manage or maintain any real property in Pennsylvania; and

9. commit any alleged tortious acts in Pennsylvania.

Defendant avers all of the foregoing facts in support of its contention that defendant is not subject to general personal jurisdiction pursuant to the traditional test that authorizes district courts to exercise personal jurisdiction over out-of-state defendants to the extent permitted by the long-arm statute of the forum state. Defendant relies on the decision of now Chief Judge J. Curtis Joyner in O'Connor v. Sandy Lane Hotel Co., Ltd., 2005 U.S.Dist. LEXIS 7397 (E.D.Pa. Apr. 28, 2005) (Joyner, J.) for the traditional test.

In addition, defendant asserts that the court does not have specific personal jurisdiction because it has not directed any activities into Pennsylvania, plaintiff's claims do not arise from any activity defendant has done or directed into Pennsylvania and that exercise of jurisdiction would not comport with traditional notions, fair play and substantial justice.

Furthermore, defendant argues that because the factual averments contained in plaintiff's Complaint involve an intentional tort, the traditional test set forth in O'Connor is not applicable. Rather, defendant contends that the test that should be utilized is the one enunciated in the decision of the United States Supreme Court in Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984).

Defendant asserts that in IMO Industries, Inc. v. Kiekert AG, 155 F.3d 254 (1998) the United States Court of Appeals for the Third Circuit, interpreting Calder, set forth the following three-prong test in cases involving intentional torts:

(1) defendant must have committed an intentional tort; (2) plaintiff must have felt the brunt of the harm caused by the tort in the forum, such that the forum can be said to be the focal point of the harm suffered by the plaintiff as a result of the tort; and (3) defendant must have expressly aimed his tortious conduct at the forum, such that the forum can be said to be the focal point of the tortious activity. IMO Industries, 155 F.3d at 256.

In this case, defendant contends that plaintiff is unable to come forward with evidence which satisfies either the second or third prongs of the Calder test. Moreover, defendant asserts that plaintiff cannot show contacts which would satisfy the traditional test either. Specifically, defendant contends that much of the evidence that plaintiff will attempt to assert occurred prior to the applicable statutes of limitations on the causes of action asserted.

Defendant relies on the decision of this court in Superior Coal Co. v. Ruhrkohle A.G., 83 F.R.D. 414 (E.D.Pa. 1979)(Troutman, J.) which requires the activities and contacts with the forum state to have occurred prior to the expiration of the applicable statutes of limitations on the underlying causes of action. In particular, defendant contends that many of the acts or contacts relied upon by plaintiff occurred prior to the two and three year statutes of limitations involved in this case. *fn1

In the alternative, defendant contends that this action should be dismissed for improper venue pursuant to 28 U.S.C. § 1391(a). Section 1391(a) provides that where jurisdiction is premised upon diversity of citizenship, an action may only be brought in a judicial district (1) where any defendant resides, if all defendants reside in the same state; (2) where a substantial part of the events or omissions giving rise to the claim occurred; or (3) the judicial district in which any defendant is subject to personal jurisdiction at the time of the action is commenced, if there is no district in which the action may otherwise be brought.

Defendant contends that 1391(a) is not a basis for jurisdiction because it does not reside in Pennsylvania; the alleged events giving rise to plaintiff's claims did not occur in Pennsylvania because any allegedly wrongful disclosures would have occurred in Nevada, not Pennsylvania; and because there is another district in which this case could be brought, namely, the United States District Court for the District of Nevada.

In addition, defendant argues in the alternative, that if the court is unwilling to dismiss the case for lack of venue, the court should nonetheless transfer this case pursuant to

28 U.S.C. 1404(a) to the District of Nevada for the convenience of the parties and witnesses and in the interests of justice. Specifically, defendant contends that the primary witnesses in this action will be current and former Niotan employees who are residents of Nevada, and that by transferring the case to Nevada, both parties will be able to compel the testimony of those witnesses at trial.

Plaintiffs' Contentions

Plaintiff asserts that personal jurisdiction over defendant is proper under both the traditional test and the Calder "effects test".

Regarding the traditional test, plaintiff contends that defendant purposefully directed its activities toward Pennsylvania or consummated a transaction in Pennsylvania. Plaintiff also argues that its claims arise out of, or relate to, at least one of those activities.

Plaintiff also contends that defendant had numerous communications with former Cabot employees while they were located in Pennsylvania, including a visit by Niotan's CEO to Pennsylvania to recruit an employee. Plaintiff further asserts that defendant sent offer letters into Pennsylvania and that former Cabot employees entered into employment and confidentiality agreements with defendant in Pennsylvania, while they were still Pennsylvania residents.

Regarding the "effects test" plaintiff argues that defendant committed an intentional tort; that plaintiff felt the brunt of the harm in Pennsylvania; and that defendant expressly aimed its tortious conduct at Pennsylvania. Specifically, plaintiff contends that its manufacturing plant in Boyertown, Berks County, Pennsylvania is the heart of its tantalum business and where its only United States facility is located. Moreover, various former Cabot employees worked at and for this facility, entered into confidentiality agreements at this facility and learned and developed Cabot's trade secrets during that work.

Moreover, plaintiff asserts that Niotan, knowing that Cabot's tantalum business and business-related trade secrets were located in Pennsylvania, engaged in a systematic process of hiring former Cabot employees and contractors with the intention of obtaining Cabot's trade secrets.

Plaintiff avers that exercising jurisdiction over Niotan will comport with traditional notions for fair play and substantial justice because it will not be a burden for Niotan to defend this action in Pennsylvania.

Plaintiff asserts that there is no problem with venue in this case because defendant is subject to personal jurisdiction and because defendant has not met its burden to show that trying this case in Nevada will be more convenient to either the parties or witnesses.

STANDARD OF REVIEW

Rule 4(e) of the Federal Rules of Civil Procedure authorizes district courts to exercise personal jurisdiction over out-of-state defendants to the extent permitted by the long-arm statute of the forum state. O'Connor v. Sandy Lane Hotel Co., Ltd., 2005 U.S.Dist. LEXIS 7397 (E.D.Pa. Apr. 28, 2005) (Joyner, J.).

In Pennsylvania, the applicable jurisdictional statute is 42 Pa.C.S.A. § 5322, which provides in subsection (b) that Pennsylvania shall exercise jurisdiction over non-residents "to the fullest extent allowed under the Constitution of the United States." The effect of this statute is to allow Pennsylvania to assert personal jurisdiction to the extent permissible under the Due Process Clause of the United States Constitution. Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 63 (3d Cir. 1984).

When, as here, a jurisdictional challenge has been raised by a defendant, plaintiffs bear the burden of producing sufficient facts to establish that the exercise of personal jurisdiction is proper. Mellon Bank (East) PSFS National Association v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992). The plaintiff may sustain its burden of proof by establishing jurisdictional facts through sworn affidavits or other competent evidence.

However, plaintiff may not rely on bare pleadings alone to withstand defendant's Rule 12(b)(2) motion. Once a motion is made, "plaintiff must respond with actual proofs, not mere allegations." Atiyeh v. Hadeed, 2007 U.S.Dist. LEXIS 19534 at *14 (E.D.Pa. Mar. 20, 2007)(Pratter, J.). The court may proceed either by affidavits and sworn documents, or by hearing. Id.

Where no evidentiary hearing has taken place, plaintiff must make out a prima facie case. LaRose v. Sponco MFG, Inc., 712 F.Supp. 455, 458 & n.2 (D.N.J. 1989). To decide whether plaintiffs have made a prima facie showing of personal jurisdiction, the court is required to accept plaintiffs' allegations as true, and construe disputed facts in their favor. Toys "R" Us, Inc. v. Step Two, S.A., 318 F.3d 446, 457 (3d Cir. 2003).

If plaintiff succeeds in making a prima facie case for jurisdiction by demonstrating the existence of minimum contacts, the burden shifts back to defendant to show that the exercise of jurisdiction is nonetheless unconstitutional. Mellon Bank, 960 F.2d at 1226. The United States Court of Appeals for the Third Circuit has stated that if defendant fails to carry its burden at this stage of the proceedings, the case will not be one in which it is appropriate for the court to further consider factors relating to "fair play and substantial justice." Mellon Bank, 960 F.2d at 1227.

However, if the court conducts an evidentiary hearing, plaintiff has a more substantial burden of proving that personal jurisdiction is proper by a preponderance of the evidence. Atiyeh, supra; LaRose, supra.

FINDINGS OF FACT

Based upon the pleadings, exhibits, *fn2 the proposed findings of fact submitted by the parties, the testimony of the witnesses *fn3 at the hearings conducted April 20, May 15, 26 and 27, 2009, and the closing arguments conducted before me on July 15, 2009 and based upon my credibility determinations, I make the following findings of fact each of which have been established by a preponderance of the evidence. *fn4

Plaintiff Cabot Corporation is a global specialty chemicals and materials company organized under the laws of the State of Delaware with its principal place of business located at

2 Seaport Lane, Suite 1300, Boston, Massachusetts. Cabot Corporation is not a citizen of the Commonwealth of Pennsylvania.

Cabot Corporation has 51 manufacturing facilities located throughout the world. Plaintiff has a manufacturing facility in Boyertown, Berks County, Pennsylvania which processes tantalum *fn5 and produces a number of other tantalum based products. One of the products that plaintiff has produced at its Boyertown facility is tantalum powder. *fn6 Cabot also produces tantalum ...


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