Innovative Digital Equipment v. Quantum Technology

• Decision Date: 19 October 1984
• Docket Number: No. C83-3675.,C83-3675.
• Citation: 597 F. Supp. 983
• Parties: INNOVATIVE DIGITAL EQUIPMENT, INC., Plaintiff, v. QUANTUM TECHNOLOGY, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

597 F. Supp. 983

INNOVATIVE DIGITAL EQUIPMENT, INC., Plaintiff, v. QUANTUM TECHNOLOGY, INC., et al., Defendants.

No. C83-3675.

United States District Court, N.D. Ohio, E.D.

October 19, 1984.

COPYRIGHT MATERIAL OMITTED

James F. Koehler, Koehler & Fulton, Cleveland, Ohio, for plaintiff.

Patrick D. Quinn, Euclid, Ohio, for defendant.

MEMORANDUM OPINION AND ORDER

BATTISTI, Chief Judge.

This matter comes before the Court on Defendants' Motion to Dismiss under Federal Rule of Civil Procedure 12(b). For the reasons outlined below, this Court denies Defendants' Motion. In addition, Defendants' Motion for More Definite Statement is denied.

I.

On September 9, 1983, Plaintiff Innovative Digital Equipment Inc. ("IDE"), an Ohio corporation, filed suit against Defendants Quantum Technology, Inc. ("Quantum"), a Michigan corporation, and Defendant Alfred C. Manfroni ("Manfroni"), a resident of the state of Michigan. IDE sells computer interface cables and other computer products. In its complaint, Plaintiff alleged that Defendant Manfroni was an employee in the sales division of IDE between March 1982 and September 1982. Plaintiff additionally alleged that Manfroni executed a secrecy and no-competition agreement with IDE at the inception of his employment. Plaintiff alleges that upon his departure from IDE, Manfroni "was instrumental in the formation of Quantum Technology, Inc." The complaint claims that Manfroni and Quantum copied "the products designed by IDE and also copied IDE's catalogue utilizing the identical model numbers, pictures and product descriptions which IDE had assigned to said products. Hence, Plaintiff IDE claims Defendants converted and copied confidential and proprietary information belonging to IDE. Plaintiff seeks $12,000 in compensatory damages for the cost of having to produce a new catalogue of its products, $500,000 in compensatory damages for the loss of sales and damage to its business reputation and an additional $500,000 in punitive damages for Defendants' alleged conversion of property and interference in Plaintiffs' contractual relationship with a supplier. Furthermore, Plaintiff seeks a preliminary and permanent injunction ordering Defendants to cease and desist from utilizing customer lists, product and catalogue information belonging to Plaintiff. On November 8, 1983, Defendants filed a Motion to Dismiss and For More Definite Statement. On April 9, 1984, Plaintiffs filed a Brief in Opposition to the Motion to Dismiss.

II.

A. 12(b)(1), 12(b)(2): Lack of jurisdiction.

Defendants move for dismissal on several grounds,¹ among them the assertion that this Court lacks both subject matter and personal jurisdiction and therefore the case should be dismissed pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(2). The Court will consider the jurisdiction challenges first because if jurisdiction is lacking, the Court cannot address the merits or sufficiency of the claim. See, Holman v. Bd. of Education, 388 F.Supp. 792 (E.D.Mich.1975).

As to the 12(b)(1) motion, Defendants mount a facial attack, alleging that the actual amount in controversy is less than the $10,000 jurisdictional amount. There is no attack made on the diversity of the parties. Although a party must satisfy the jurisdictional amount in controversy requirement, Johnson v. Ford Motor Co., 354 F.Supp. 645 (N.D.Miss.1973), the complaint will not be dismissed (where the claim is made in good faith) unless it is a "legal certainty" that the claim is actually for less than the minimum amount. Johnson, 354 F.Supp. at 645; Murray v. Vaughn, 300 F.Supp. 688 (D.C.R.I.1969); Sun Oil Co. v. Pfeiffer, 1 F.R.D. 119 (D.C.Oklah.1939).

Plaintiffs have claimed $512,000 in compensatory damages and another $500,000 in punitive damages. In determining the amount in controversy, the courts have used the "plaintiff-viewpoint" rule. This rule states that a claim's value is "the value to the plaintiff of the right which he in good faith asserts in his pleading that sets forth the operative facts which constitute his cause of action." Dobie, Jurisdictional Amount in the United States District Court, 38 Harv.L.Rev. 733 (1925). Specifically, this rule was adopted in a case very similar to the instant one. In that case, plaintiff sought to enjoin the activities of a competing business which it is claimed was interfering with it. Glenwood Light & Water Co. v. Mutual Light, Heat & Power Co., 239 U.S. 121, 36 S.Ct. 30, 60 L.Ed. 174 (1915). Hence, the value to Plaintiff of this action is at least $500,000 for the loss of sales and damage to its business reputation, without considering punitive damages. Furthermore, Plaintiffs seek to recover $12,000 as compensatory damages for the cost of their new catalogue. In sum, Plaintiffs allege a claim whose value exceeds the jurisdictional amount.

In a challenge to personal jurisdiction, the plaintiff has the burden of making a threshold showing of jurisdiction. Fisher v. First Nat. Bank, 338 F.Supp. 525 (S.D. Iowa 1972), app. dismissed, 466 F.2d 511 (8th Cir.1972). Specifically, the plaintiff must establish prima facie an act by defendant which is within the ambit of the particular long-arm statute, Ghazoul v. International Management Services, Inc., 398 F.Supp. 307 (S.D.N.Y.1975).

Ohio's long-arm statute is set out at Ohio Revised Code § 2307.382. The statute reads in pertinent part:

(A) A court may exercise personal jurisdiction over a person who acts directly or by an agent, as to a cause of action arising from the person's:

(1) Transacting any business in this state;

(2) Contracting to supply services or goods in this state;

* * * * * *

(4) Causing tortious injury in this state by an act or omission outside this state if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenues from goods used or consumed or services rendered in this state.

* * * * * *

(6) Causing tortious injury in this state to any person by an act outside this state committed with the purpose of injuring persons, when he might reasonably have expected that some person would be injured thereby in this state.

Once again viewing the pleadings in the light most favorable to the non-moving party, Plaintiff IDE has established a prima facie case for jurisdiction. Plaintiffs allege that the theft and conversion of their catalogue and customer lists occurred upon defendant Manfroni's departure from IDE in Ohio. Furthermore, the contract at issue here was executed in Ohio. Additionally, IDE claims Quantum and Manfroni tortiously interfered with their business relationship with an Illinois supplier and customer. Given Manfroni's previous relationship with Plaintiffs and the thrust of the letter between Dennis Deal, Executive Vice President of Quantum, to Mr. Jerry Baker of IDE, Defendants can reasonably be expected to know that their actions might injure IDE. At the very least, this Court deems Defendants to have sufficient minimum contacts such that it does not offend "traditional motions of fair play and substantial justice," International Shoe v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), to assert jurisdiction over Defendants. Since a state may assert jurisdiction over a nonresident who engages in a single isolated transaction in a state out of which a tort arises, Eyerly Aircraft Co. v. Killian, 414 F.2d 591 (5th Cir.1969), it is not manifestly unfair and unreasonable to expect Defendants to defend themselves in Ohio given Defendant Manfroni's past relationship and Quantum's business relationship with IDE.

B. 12(b)(6): Failure to state a claim.

Defendants' third ground for dismissal is that under Federal Rule of Civil Procedure 12(b)(6), Plaintiff has failed to state a claim upon which relief can be granted. In determining a 12(b)(6) motion, the court will look principally at the pleading. Bowman v. Grolsche, Bierbrouwerij B.V., 474 F.Supp. 725 (D.C. t. 1979). The standard for a well-pleaded complaint, as stated in Federal Rule of Civil Procedure 8(a)(2) is that the pleading "shall contain a short and plain statement of the claim showing that the pleader is entitled to relief and whether relief can be granted on such a claim." Davis v. Pasman, 442 U.S. 228, 99 S.Ct. 2264, 60 L.Ed.2d 846 (1979). More pointedly, the question is whether the Complaint with all the well-pleaded material facts taken as true and construed in the light most favorable to the plaintiff sets forth facts sufficient to state a legal claim. Mackenzie v. International Union of Operating Engineers, 472 F.Supp. 1025 (N.D. Miss.1979).

In the instant case, Plaintiff alleges that Defendant Manfroni, a former employee, breached an agreement protecting confidential information and subsequently went into business to compete against his former employer. Defendants copied the designs, customer lists and catalogues of the plaintiffs. Plaintiff notes in his Reply Brief to the Motion to Dismiss that such activities, assuming the facts pleaded by plaintiff are true, constitute violations of Ohio's deceptive trade practices act as set forth in Ohio Revised Code §§ 4165.01-4165.03.² At paragraph 10 of its complaint, Plaintiff states that a product manager for an Illinois computer supply corporation was confused when presented a Quantum catalogue and asked the Quantum representative present about the catalogue's similarility to IDE's catalogue. This incident if true would indicate that Defendants' activities did cause confusion in the minds of the public. Plaintiff is also correct that unauthorized use of customer lists and sales information has been a long-standing action in common law in Ohio. See, e.g. John T. Lloyd Laboratories v. Lloyd Bros. Pharamacists, 131 F.2d 703 (6th Cir.1943).

Indeed, Plaintiff did not cite the Ohio Revised Code sections or the common law unfair trade practices action in his original Complaint. However, dismissal is not warranted simply because of failure...