Clearone, Inc. v. Revolabs, Inc.

• Decision Date: 01 April 2016
• Docket Number: No. 20141184.,20141184.
• Citation: 369 P.3d 1269
• Parties: CLEARONE, INC., Appellant, v. REVOLABS, INC., Appellee.
• Court: Utah Supreme Court

369 P.3d 1269

CLEARONE, INC., Appellant,
v.
REVOLABS, INC., Appellee.

No. 20141184.

Supreme Court of Utah.

April 1, 2016.

369 P.3d 1271

James E. Magleby, Christine T. Greenwood, Jennifer Fraser Parrish, Kennedy Davis Nate, Salt Lake City, for appellant.

Steven W. Dougherty, Andrew R. Hale, Salt Lake City, for appellee.

Chief Justice DURRANT authored the opinion of the Court, in which Associate Chief Justice LEE, Justice DURHAM, and Justice HIMONAS joined. Justice JOHN A. PEARCE became a member of the Court on December 17, 2015, after oral argument in this matter, and accordingly did not participate.

Chief Justice DURRANT, opinion of the Court:

Introduction

¶ 1 This case presents us with the opportunity to review and apply the United States Supreme Court's recent cases on both specific and general personal jurisdiction. The question is whether Revolabs, a corporation incorporated in Delaware with its principal place of business in Massachusetts, is subject to either specific or general personal jurisdiction in Utah. The underlying dispute arose when Revolabs allegedly interfered with ClearOne's contractual relationship with Timothy Mackie by recruiting and hiring him while he was still employed by ClearOne. ClearOne brought suit against Revolabs, asserting claims of intentional interference with a contractual relationship, predatory hiring, and aiding and abetting a breach of fiduciary duty. The trial court granted Revolabs's motion to dismiss for lack of personal jurisdiction, which ruling ClearOne now appeals. After a review of the United States Supreme Court's personal jurisdiction jurisprudence, we conclude that Revolabs has insufficient contacts with Utah to subject it to jurisdiction here and affirm.

Background

¶ 2 Plaintiff ClearOne is a Utah corporation that designs, develops, and sells audio-visual equipment, with its principal place of business in Utah.¹ Defendant Revolabs is a competitor that is incorporated in Delaware with its principal place of business in Massachusetts. Mr. Mackie is a former employee of ClearOne who worked for ClearOne in a technical sales position from November 2009 to September 2013. In December 2009, Mr. Mackie entered into a Confidentiality, Non–Competition, and Invention Assignment Agreement with ClearOne. This employment contract included provisions preventing Mr. Mackie from competing with ClearOne during his employment and for one year after the employment ended and prohibiting him from soliciting ClearOne customers for the same one-year period. There were also a number of other provisions relating to the confidentiality of customer information and trade secrets. Both the contract and the fiduciary duties owed by Mr. Mackie to ClearOne were to be performed, at least in

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part, in Utah and were governed by Utah law. Mr. Mackie resided in Texas during these events, and the only allegations as to where Mr. Mackie performed his work for ClearOne indicates that he worked in Texas.

¶ 3 In August 2013, Mr. Mackie, while still residing in Texas, contacted individuals at Revolabs about leaving ClearOne to work for Revolabs. Over the next several weeks, Mr. Mackie communicated with several individuals about this potential transition through calls, video chats, and emails. These individuals included: Curtiss Singleton, Revolabs's director of sales for the Americas, who was located in Georgia; Marc Cremer, Revolabs's chief operating officer, who was located in Massachusetts; Daniel Kleman, Revolabs's field sales engineer for its western region, who was located in California; and Jonathan McGarry, Revolabs's field sales engineer for its eastern region, who was located in Massachusetts. After several discussions and interviews, Mr. Cremer offered Mr. Mackie a position at Revolabs on September 3, 2013, which Mr. Mackie accepted. Mr. Mackie executed an employment and confidentiality agreement with Revolabs on September 6, 2013, and tendered his resignation to ClearOne on September 9, 2013, stating that his last day would be September 20, 2013. Mr. Mackie began working for Revolabs on September 23, 2013. No part of these events took place in Utah.

¶ 4 On December 19, 2013, ClearOne filed suit against Mr. Mackie in Utah district court for, inter alia, breach of the employment agreement, which litigation remains pending in a separate action. After learning of Revolabs's involvement with and encouragement of Mr. Mackie's resignation, ClearOne filed suit against Revolabs in Utah district court on July 30, 2014. ClearOne sought damages and an injunction for Revolabs's alleged tortious interference with Mr. Mackie's employment contract, predatory hiring under the Utah Unfair Competition Act, and aiding and abetting Mr. Mackie's alleged breach of his fiduciary duties to ClearOne.

¶ 5 Prior to discovery being conducted, Revolabs filed a motion to dismiss under Utah Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. ClearOne opposed the motion and filed its own motion seeking jurisdictional discovery in order to determine whether Revolabs should be subject to general jurisdiction in Utah. As evidence in support of its claim that Revolabs had systematic and continuous contacts with Utah, ClearOne pointed to Revolabs's publicly accessible website; the fact that Revolabs is included in an online directory of Utah businesses maintained by the Utah Department of Workforce Services (though the site states that Revolabs currently has no employees in Utah); and a bid solicitation by Utah Valley University for audio-visual equipment, including equipment sold by Revolabs. Revolabs responded to this evidence with an affidavit stating that it "does not maintain or conduct any business operations in the state of Utah and does not direct any advertising into Utah; it has no offices in Utah, owns no property in Utah[,] and maintains no employees in Utah." ClearOne has not disputed this statement. The trial court denied ClearOne's request for discovery and granted Revolabs's motion to dismiss. ClearOne appealed the trial court's decision.

Standard of Review

¶ 6 ClearOne raises two claims on appeal: first, the trial court erred in dismissing Revolabs for lack of specific personal jurisdiction. "[T]he propriety of a 12(b)(2) dismissal is a question of law, [and] we give the trial court's ruling no deference and review it under a correctness standard."² Second, the trial court erred in denying discovery to determine whether Revolabs was subject to general personal jurisdiction in Utah. We review the trial court's decision on this issue for abuse of discretion.³ We have jurisdiction pursuant to Utah Code section 78A–3–102(3)(j).

Analysis

¶ 7 "The authority of the state to hale a nonresident into a state court hinges

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on the ability to establish personal jurisdiction."⁴ And a court's exercise of personal jurisdiction over a party must be "consistent with the due process protections of the Fifth and Fourteenth Amendments to the United States Constitution."⁵ There are two categories of personal jurisdiction, specific and general jurisdiction, both of which are implicated in this case.⁶ ClearOne first argues that the trial court erred in dismissing Revolabs for lack of specific personal jurisdiction. Alternatively, ClearOne claims that the court abused its discretion by denying ClearOne the opportunity to conduct discovery in order to determine whether Revolabs should be subject to general personal jurisdiction. Below, we discuss these two issues in turn and affirm.

I. Revolabs Is Not Subject to Specific Personal Jurisdiction in Utah

¶ 8 "[S]pecific personal jurisdiction gives a court power over a defendant only with respect to claims arising out of the particular activities of the defendant in the forum state...."⁷ The United States Supreme Court has interpreted the Due Process Clause of the Fourteenth Amendment to permit a state to exercise specific personal jurisdiction over a party only when the party has "minimum contacts with [the state] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ "⁸ "In judging minimum contacts, a court properly focuses on ‘the relationship among the defendant, the forum, and the litigation.’ "⁹ The Supreme Court recently clarified the kind of contacts with a state that satisfy this test in Walden v. Fiore.¹⁰ We first address Walden and its impact on the "effects" test derived from the Supreme Court's decision in Calder v. Jones. In so doing, we recognize that the Supreme Court has rejected a particular approach to the minimum contacts test, which limits our decision in Pohl, Inc. of America v. Webelhuth. We then apply the principles found in Walden to the present case, which lead us to the conclusion that the trial court was correct in dismissing Revolabs for lack of personal jurisdiction.

A. Walden Narrowed the Broad Interpretation of Calder Adopted in Pohl

¶ 9 ClearOne relies almost exclusively on our 2008 decision in Pohl, Inc. of America v. Webelhuth in support of its argument that Revolabs is subject to specific personal jurisdiction in Utah. Pohl in turn...