Arthrex, Inc. v. Hilton

• Decision Date: 08 March 2022
• Docket Number: 2:21-cv-850-JLB-NPM
• Court: U.S. District Court — Middle District of Florida
• Parties: ARTHREX, INC., Plaintiff, v. JEREMY CHARLES HILTON, an individual, and PARAGON 28, INC., a Delaware corporation, Defendants.

ARTHREX, INC., Plaintiff,
v.
JEREMY CHARLES HILTON, an individual, and PARAGON 28, INC., a Delaware corporation, Defendants.

No. 2:21-cv-850-JLB-NPM

United States District Court, M.D. Florida, Fort Myers Division

March 8, 2022

ORDER

JOHN L. BADALAMENTI UNITED STATES DISTRICT JUDGE

This matter comes before the Court on a Motion for Preliminary Injunction filed by Plaintiff Arthrex, Inc. (“Arthrex”) as well as two Motions to Dismiss filed by Defendants Jeremy Charles Hilton (“Mr. Hilton”) and Paragon 28, Inc. (“Paragon”), asserting that this Court does not have personal jurisdiction over them. Paragon has filed a response in opposition to Arthrex's Motion for Preliminary Injunction. Arthrex has filed Responses in opposition to Hilton's and Paragon's motions, and Paragon has filed a Reply. The Court has also conducted an evidentiary hearing and carefully reviewed the entire record, including the myriad exhibits submitted by all parties. (Doc. 35; Doc. 37.)

After considering all of the relevant materials, the Court finds, for the reasons outlined below, that it has personal jurisdiction over Mr. Hilton, but it does not have personal jurisdiction over Paragon. As such, Mr. Hilton's Motion to

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Dismiss (Doc. 30) is DENIED, and Paragon's Motion to Dismiss (Doc. 31) is GRANTED. The Court also finds that Arthrex has failed to sufficiently establish justification for the entry of a preliminary injunction at this time. Accordingly, Arthrex's Request for Preliminary Injunction (Doc. 2) is DENIED.

BACKGROUND

Arthrex is a “leading designer and manufacturer of orthopedic surgical products and related medical training, ” which has its principal place of business in Naples, Florida. (Doc. 1 at ¶¶ 1, 8.) One of Arthrex's many lines of business is the design and development of products related to the foot and ankle. (Id. at ¶¶ 22-23.) Arthrex sells these products nationwide and internationally via a network of customer contacts as well as proprietary sales strategies, training methods, pricing procedures, and marketing materials. (Id. at ¶¶ 24, 27.)

Paragon is a medical device company focused exclusively on creating orthopedic surgical products for the foot and ankle. (Id. at ¶¶ 29-31.) Paragon's principal place of business is in Englewood, Colorado. (Id. at ¶ 10; Doc. 37 at 54.) There are similarities between Paragon's products and Arthrex's products, and the two companies compete directly for the same clients and entities in the same geographical regions. (Doc. 1 at ¶¶ 31, 33.) Arthrex and Paragon “often submit bids and respond to requests for proposals from the same potential clients/accounts.” (Id. at ¶ 33.)

In addition to their overlapping businesses, Arthrex and Paragon are linked by Mr. Hilton. Mr. Hilton, a Colorado resident, is a former Area Manager for

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National Accounts at Arthrex who resigned from Arthrex in September 2021 to take a job at Paragon. (Id. at ¶¶ 1, 3, 9.) In his role at Arthrex, Mr. Hilton managed approximately eighty-two accounts throughout fourteen states in the central United States. (Id. at ¶¶ 50, 53.) He “often handled multi-state and national accounts within the foot and ankle space.” (Id. at ¶ 46.) This position gave him access to Arthrex's pricing and sales tactics, customer contacts and preferences, and specific discounts and rebates offered to each of Arthrex's clients. (Id. at ¶ 48.)

On January 16, 2017, Mr. Hilton signed^[1] an Employment Agreement with Arthrex, which contained “restrictive covenants, including confidentiality/nondisclosure, non-competition, and non-solicitation of customers and employees.” (Id. at ¶ 38.) In relevant part, the Employment Agreement created a one-year restricted period following the cessation of Mr. Hilton's employment with Arthrex during which he is prohibited from having any involvement^[2] with an Arthrex competitor.

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(Id. at ¶ 43.) The Employment Agreement also includes a tolling provision, providing for the extension of the restricted period in the event of the Employment Agreement's violation, and a provision providing for damages and injunctive relief. (Id. at ¶¶ 44-45.)

Mr. Hilton's last day of employment with Arthrex was September 23, 2021. (Id. at ¶ 56.) On August 30 and September 23, Mr. Hilton inserted a USB/external drive into his company-owned laptop and accessed, and allegedly copied or downloaded, hundreds of documents. (Id. at ¶¶ 3-4.) Arthrex claims that the vast majority of the documents accessed were contracts between Arthrex and its customers. (Id. at ¶ 3.) A price list, a document with data on Arthrex's largest customers, and a marketing presentation laying out Arthrex's business model are also believed to have been copied. (Id. at ¶ 5.) In all, Arthrex contends that Mr. Hilton's alleged downloads contain “Arthrex's sensitive, proprietary, and trade secret information.” (Id.)

On September 27, 2021, Arthrex sent Mr. Hilton a letter, copying Paragon, to remind Mr. Hilton about his restrictive covenants and threatening legal action if he

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failed to honor them. (Id. at ¶ 57; Doc. 1-2.) Mr. Hilton responded to the letter saying that the restrictive covenants were not enforceable. (Doc. 1 at ¶ 58.) Paragon did not respond to the letter. (Id.) On October 1, 2021, Mr. Hilton commenced his employment with Paragon. (Id. at ¶ 56.)

On November 15, 2021, Arthrex filed its Complaint (Doc. 1) alleging: (1) that Mr. Hilton breached his Employment Agreement, (2) that Paragon tortiously interfered with Arthrex's contractual relationship with Mr. Hilton and its existing and prospective customers, clients, and agents, (3) that both Mr. Hilton and Paragon misappropriated Arthrex's trade secrets under the Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1836(b)(1), and (4) that both Mr. Hilton and Paragon misappropriated Arthrex's trade secrets under the Florida Uniform Trade Secrets Act, Fla. Stat. § 688.001 (“FUTSA”). (Id. at ¶¶ 85-156.)

DISCUSSION

“A federal district court in Florida may exercise personal jurisdiction over a nonresident defendant to the same extent that a Florida court may, so long as the exercise is consistent with federal due process requirements.” Licciardello v. Lovelady, 544 F.3d 1280, 1283 (11th Cir. 2008). Personal jurisdiction is a two-part inquiry wherein the court must determine first, “whether the exercise of jurisdiction is appropriate under [Florida]'s long-arm statute, ” and second, whether exercising personal jurisdiction over the defendant is consistent with the Due Process Clause of the Fourteenth Amendment of the U.S. Constitution. Mut. Serv. Ins. Co. v. Frit Indus., Inc., 358 F.3d 1312, 1319 (11th Cir. 2004) (citation omitted). “Only where

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the long-arm statute provides jurisdiction do [courts] proceed to the second step.” PVC Windoors, Inc. v. Babbitbay Beach Const., N.V., 598 F.3d 802, 807 (11th Cir. 2010).

Where a defendant challenges personal jurisdiction in a Federal Rule of Civil Procedure 12(b)(2) motion to dismiss, the district court must hear and decide the issue before trial. Fed.R.Civ.P. 12(i). In this case, the Court has conducted an evidentiary hearing on both Mr. Hilton's and Paragon's motions to dismiss for lack of personal jurisdiction. Following an evidentiary hearing, the court “adjudicate[s] the issue of whether the court has jurisdiction over the defendant's person” by “determine[ing] the credibility of the witness testimony, weigh[ing] the evidence, and find[ing] the relevant jurisdictional facts.” PVC Windoors, Inc., 598 F.3d at 810. “Because the court is making factual determinations and reaching a final decision on jurisdiction, a preponderance-of-the-evidence standard applies.” AcryliCon USA, LLC v. Silikal GmbH, 985 F.3d 1350, 1364 (11th Cir. 2021). The Court will therefore weigh the evidence presented to determine whether Arthrex has met its burden of establishing personal jurisdiction over Mr. Hilton and Paragon by a preponderance of the evidence.

I. FLORIDA'S LONG-ARM STATUTE

The application of Florida's long-arm statute is a question of Florida state law and, as a result, courts must construe the long-arm statute as would the Florida Supreme Court. See Meier ex rel. Meier v. Sun Int'l Hotels, Ltd., 288 F.3d 1264, 1271 (11th Cir. 2002). “In the absence of definitive guidance from the Florida

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Supreme Court, [courts] follow relevant decisions from Florida's intermediate appellate courts.” State Farm Fire & Cas. Co. v. Steinberg, 393 F.3d 1226, 1231 (11th Cir. 2004).

Arthrex argues that the Court has specific personal jurisdiction over both Mr. Hilton and Paragon under the tortious act provision of the Florida long-arm statute, Fla. Stat. § 48.193(1)(a)(2).^[3] (Doc. 34 at 2; Doc. 39 at 9.) Arthrex also argues that the Court has specific personal jurisdiction over Mr. Hilton under the breach of contract provision of the Florida long-arm statute, Fla. Stat. § 48.193(1)(a)(7). (Doc. 34 at 2.)^[4] Florida's long-arm statute provides in relevant parts:

(1)(a) A person, whether or not a citizen or resident of this state, who personally or through an agent does any of the acts enumerated in this subsection thereby submits himself or herself and, if he or she is a natural person, his or her personal representative to the jurisdiction of the courts of this state for any cause of action arising from any of the following acts:

(2) Committing a tortious act within this state.

(7) Breaching a contract in this state by failing to perform acts required by the contract to be performed in this state.

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Fla. Stat. §§ 48.193(1)(a)(2) & 48.193(1)(a)(7).

A. Arthrex Has Adequately Alleged that Florida's Long-Arm Statute Applies to Mr. Hilton

Arthrex argues that Mr. Hilton breached his Employment Agreement and misappropriated its trade secrets, thereby enabling this Court to have personal jurisdiction over Mr. Hilton under section 48.193(1)(a)(7) and section 48.193(1)(a)(2), respectively, of...