Esoterix Genetic Laboratories, LLC v. Mckey, 082211 NCSUP, 11 CVS 1379

Docket Nº:11 CVS 1379
Opinion Judge:GALE, JUDGE.
Party Name:ESOTERIX GENETIC LABORATORIES, LLC, Plaintiff, v. BETH MCKEY, KYLE MECKLENBURG and COUNSYL, INC., Defendants.
Attorney:Kelley Drye & Warren LLP, by Robert Steiner, pro hac vice, and K&L Gates LLP, by Amie Flowers Carmack and Douglas W. Britt for Plaintiff Esoterix Genetic Laboratories, LLC. Womble Carlyle Sandridge & Rice, PLLC, by M. Todd Sullivan for Defendants Beth McKey, Kyle Mecklenburg, and Counsyl, Inc.
Case Date:August 22, 2011
Court:Superior Courts of Law and Equity of North Carolina
 
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2011 NCBC 32

ESOTERIX GENETIC LABORATORIES, LLC, Plaintiff,

v.

BETH MCKEY, KYLE MECKLENBURG and COUNSYL, INC., Defendants.

No. 11 CVS 1379

Superior Court of North Carolina, Alamance

August 22, 2011

Kelley Drye & Warren LLP, by Robert Steiner, pro hac vice, and K&L Gates LLP, by Amie Flowers Carmack and Douglas W. Britt for Plaintiff Esoterix Genetic Laboratories, LLC.

Womble Carlyle Sandridge & Rice, PLLC, by M. Todd Sullivan for Defendants Beth McKey, Kyle Mecklenburg, and Counsyl, Inc.

ORDER

GALE, JUDGE.

{1} This matter is before the Court on Defendant Counsyl Inc.'s Motion to Dismiss Pursuant to Rule 12(b)(2) ("Motion"). The Motion is DENIED, as the Court finds that Plaintiff has not proven personal jurisdiction based on specific jurisdiction but has proven personal jurisdiction based on general jurisdiction.

I. PROCEDURAL BACKGROUND

{2} Plaintiff Esoterix Genetic Laboratories, LLC ("Esoterix"), a Delaware company having its principal place of business in Alamance County, North Carolina, filed its Complaint on May 24, 2011 against its former employees Beth McKey ("McKey"), a resident of the State of Washington, and Kyle Mecklenburg ("Mecklenburg"), a resident of the State of Oklahoma, as well as their new employer Counsyl, Inc. ("Counsyl"), a Delaware company having its principal place of business in California. The action is based on contracts McKey and Mecklenburg entered in connection with their employment with Esoterix, Counsyl's alleged tortious interference with those contracts, and alleged misappropriation of trade secrets.

{3} Presiding Superior Court Judge W. Osmond Smith, III entered a Temporary Restraining Order ("TRO") against all Defendants by a May 25, 2011 order, which set a preliminary injunction hearing for June 6, 2011 and allowed expedited discovery pursuant to parameters to be negotiated by counsel. Judge Smith, on his own motion, issued a further order on May 27, 2011 dissolving the TRO against Counsyl. The parties executed a consent order extending the TRO until a preliminary injunction hearing to be held on June 16, 2011. Esoterix filed an Amended Complaint on June 15, 2011. On that same day, the parties consented to a further extension of the TRO. On June 22, 2011, Defendants timely designated the matter as a complex business case pursuant to N.C. Gen. Stat. §7A-45(4) based on the trade secret claims added by the Amended Complaint. By consent order of July 13, 2011, the TRO was extended, and the Court set a July 21, 2011 hearing date for the Rule 12(b)(2) motion Counsyl indicated it would file, to be followed by an August 11, 2011 hearing on Plaintiff's motion for preliminary injunction. The TRO has again been extended by consent until a hearing on the motion for preliminary injunction is set.

{4} Counsyl filed its Motion on July 18, 2011, and the parties filed briefs in support and opposition on an expedited basis. The Court heard oral argument on July 21, 2011, but withheld its ruling pending further jurisdictional discovery and the submission of proposed findings, which have now been submitted. Individual Defendants McKey and Mecklenburg do not challenge personal jurisdiction as to claims against them. Counsyl's Motion is now ripe for ruling.

II. FACTS

{5} The parties conducted discovery and have submitted evidence regarding personal jurisdiction in the form of deposition testimony, affidavits, and documents. On this Motion, the Court sits as a fact finder, and the burden is upon Plaintiff to show jurisdiction by a preponderance of the evidence. Deer Corp. v. Carter, 177 N.C.App. 314, 322, 629 S.E.2d 159, 166 (2006). The Court's fact findings are, however, made for the purposes of the present Motion and do not foreclose further consideration of the evidence on the underlying substantive claims.

{6} Esoterix is a wholly-owned subsidiary of Laboratory Corporation of America Holdings ("LabCorp"), a corporation organized under the laws of the State of Delaware, with its principal place of business in Burlington, Alamance County, North Carolina. Esoterix provides medical laboratory tests and services which it markets and sells to medical professionals and others through a network of sales professionals. LabCorp created Esoterix following its acquisition of Genzyme Corporation ("Genzyme"). (Aff. of Todd Wauters, Esoterix's Vice President of National Sales for the Reproductive Genetics Division ("Wauters Aff.") ¶¶ 3-4.)1

{7} McKey was employed by Esoterix as a Territory Manager for a region in the Western United States. (Wauters Aff. ¶ 16.)

{8} Mecklenburg was employed by Esoterix as a Territory Manager for a region in the Midwestern United States. (Wauters Aff. ¶ 15.)

{9} Counsyl is a corporation organized under the laws of the State of Delaware with its principal place of business in California. (Aff. of Ramji Srinivasan ¶¶ 3-5.)

{10} Both Esoterix and Counsyl conduct business in the field of genetic testing. The parties dispute whether their tests are different and whether they are competitive. The Court need not resolve that dispute in order to rule upon the present Motion.

{11} McKey and Mecklenburg each signed agreements which contain several covenants, including Noncompetition, Non-Solicitation of Customers, and Non-Solicitation of Company Employees. (Wauters Aff., Exs. A, B ("Confidentiality Agreements").)

{12} Esoterix further alleges that McKey and Mecklenburg received information during the course of their employment that constitutes protected trade secrets and that such trade secrets have been misappropriated. (See Amended Compl. ¶ 36; Wauters Aff. ¶ 37.)

{13} The Confidentiality Agreements McKey and Mecklenburg signed with Esoterix include at Paragraph 7(g) a consent to personal jurisdiction in North Carolina and a waiver of jurisdictional or venue defenses. (Confidentiality Agreements.)

{14} Esoterix asserts specific jurisdiction upon allegations that Counsyl was aware of the Confidentiality Agreements and knew that its employing McKey and Mecklenburg would constitute breaches of their Confidentiality Agreements.

{15} Esoterix asserts general jurisdiction based on its further claims that Counsyl has undertaken actions directed at the State of North Carolina.

{16} The parties dispute whether Counsyl was aware of the Confidentiality Agreements before hiring McKey and Mecklenburg. Mecklenburg and McKey testified that they provided Counsyl a copy of their Confidentiality Agreements before being hired and obtained indemnity from Counsyl as a part of their employment terms. (Dep. of Kyle Mecklenburg ("Mecklenburg Dep.") 32:20-34:1, 191:10-192:20, 193:10-14; Dep. of Beth McKey ("McKey Dep.") [Rough] 117:3-12, 118:4-119:17, 126:23-128:14.) Counsyl's CEO, testifying for Counsyl pursuant to Rule 30(b)(6), indicated that he did not recall whether he was aware of the Confidentiality Agreements before Mecklenburg was hired. (Rule 30(b)(6) Dep. of Ramji Srinvasan ("Counsyl Dep.") 136:6-13.)

{17} Esoterix sent letters to McKey and Mecklenburg on May 9, 2011 following the termination of their employment with Esoterix, reminding them of their obligations under their Confidentiality Agreements. (Wauters Aff. ¶ 30, Exs. E, F.)

{18} On May 17, 2011, Counsyl's attorney replied on behalf of McKey and Mecklenburg denying that their new employment with Counsyl breached their Confidentiality Agreements. (Wauters Aff. ¶ 31, Ex. G.) Counsyl's lawyer further noted a disagreement with opposing counsel regarding the enforceability of the Confidentiality Agreements. (Aff. of Robert Steiner in Opp'n to Jurisdiction ("Opp'n Aff."), Ex. 5.)

{19} McKey testified that she solicited customers in her former territory on May, 16 2011, and sent e-mails to Esoterix customers for which she was responsible while employed by Esoterix. (McKey Dep. [Rough] 153:18-154:25, 155:13-157:10.)

{20} Esoterix offered evidence regarding Counsyl's connections with the State of North Carolina other than its hiring of McKey and Mecklenberg.

{21} While Counsyl was incorporated approximately four (4) years ago, it has only had active operations for the sale of products for approximately two (2) years. Counsyl's contacts with North Carolina began in October 2010. (Counsyl Dep. 15:21-16:1, 21:22-25:4.)

{22} Counsyl representatives have visited North Carolina a total of five (5) times for purposes of conducting business through which Counsyl can sell its tests in North Carolina. (Counsyl Dep. 15:21-16:1, 21:22-25:4.) Counsyl has had multiple communications with prospective accounts in North Carolina and began delivering products and services in North Carolina in October 2010. (Counsyl Dep. 14:9-13, 15:21-16:1, 21:22-25:4, 16:20-17:8, 54:25-55:7; Opp'n Aff., Exs. 7, 8; Dep. of Leslie Evans ("Evans Dep.") [Rough] 25:8-14.)

{23} In October 2010, Counsyl began an on-going business relationship with one North Carolina physician practice. (Opp'n Aff., Ex. 7; Counsyl Dep. 14:9-13, 54:25-55:7...

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