Rf Technologies v. Applied Microwave Technologies, No. CIV.05-32-P-C.

• Decision Date: 06 May 2005
• Docket Number: No. CIV.05-32-P-C.
• Citation: 369 F.Supp.2d 24
• Parties: RF TECHNOLOGIES CORPORATION, RF Technologies, LLC, and The Ferrite Company, Inc., Plaintiffs v. APPLIED MICROWAVE TECHNOLOGIES, INC., Timothy Scheurs, Montylee D. Watt, Terry LeClere, Tom Allison, and William Nurre, Defendants
• Court: U.S. District Court — District of Maine

Page 24

369 F.Supp.2d 24

RF TECHNOLOGIES CORPORATION, RF Technologies, LLC, and The Ferrite Company, Inc., Plaintiffs v. APPLIED MICROWAVE TECHNOLOGIES, INC., Timothy Scheurs, Montylee D. Watt, Terry LeClere, Tom Allison, and William Nurre, Defendants

No. CIV.05-32-P-C.

United States District Court, D. Maine.

May 6, 2005.

James G. Goggin, Portland, ME, for Plaintiffs.

Sarah Jane Gayer, Kevin H. Collins, Cedar Rapids, IA, Todd S. Holbrook, Portland, ME, for Defendants.

MEMORANDUM AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS AND DENYING DEFENDANTS' MOTION TO TRANSFER TO THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF IOWA

GENE CARTER, Senior District Judge.

Plaintiffs RF Technologies Corporation (hereinafter "RFT Corp."),¹ RF Technologies, LLC (hereinafter "RFT, LLC"), and the Ferrite Company, Inc. (hereinafter "Ferrite") brought a five count Amended Complaint against Applied Microwave Technologies, Inc. (hereinafter "AMTek") and five individual AMTek employees. Plaintiffs' Amended Complaint alleges conversion (Count I), breach of contract (Count II), misappropriation of trade secrets in violation of 10 M.R.S.A. § 1541 et seq. (Count III), and unfair competition (Count IV). In Count V, Plaintiffs seek a declaratory judgment that RFT Corp. and RFT, LLC are not required to perform under the terms of a purchase order placed by AMTek.

Now before the Court is Defendants' Motion to Dismiss or, in the alternative, Motion to Transfer (Docket Item No. 31). Defendants allege that neither AMTek nor the named individual employees are subject to personal jurisdiction in Maine.² In the alternative, Defendants suggest that this lawsuit should be transferred to the United States District Court for the Northern District of Iowa. In the event that the Court denies the Motion to Dismiss for lack of personal jurisdiction, Defendants contend that the declaratory judgment claim should be dismissed pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief may be granted. For the reasons set forth below, the Court will deny Defendants' Motion to Dismiss for lack of personal jurisdiction as to Defendants AMTek and Scheurs, grant Defendants' Motion to Dismiss as to Defendants Allison, LeClere, and Watt, deny Defendants' Motion to Dismiss for failure to state a claim, and deny Defendants' Motion to Transfer.

I. Factual Background

Ferrite is a Delaware corporation with its principal place of business in Nashua, New Hampshire. Amended Complaint ¶ 3. Ferrite is in the business of designing, manufacturing, selling, and distributing high power microwave components and industrial systems, including industrial microwave ovens used for industrial cooking of foods. Id. ¶ 11. RFT Corp. is a Maine corporation with its principal place of business in Lewiston, Maine. RFT Corp. is a manufacturer of machined products used in industrial microwave ovens. Id. ¶ 18. RFT, LLC is a Delaware corporation with its principal place of business in Lewiston, Maine. RFT, LLC is wholly owned by Ferrite.

On January 17, 2003, Ferrite purchased the assets of the Amana Industrial Microwave Division (hereinafter "Amana") — owned at the time by the Maytag Corporation — for $2,800,000 plus royalties on sales. Id. ¶ 12. Among the assets purchased by Ferrite from Maytag were the Amana product designs and specifications, including associated engineering drawings and documents. Id. Amana is located in Newton, Iowa. Id.

Defendants Scheurs, Watt, LeClere, Allison, and Nurre (hereinafter "the Former Amana Employees") were employees of Amana at the time Ferrite purchased Amana's assets. Id. ¶ 13. During the course of their employment with Amana, each defendant was required to sign a confidentiality agreement with Maytag, which required of him the following:

(a) to hold in confidence and not to use or disclose either during or after the termination of his employment any confidential Maytag information;

(b) not to make copies of any confidential Maytag information; and

(c) to return to Maytag prior to termination of his employment all tangible things in his possession and control that contain or embody any confidential Maytag information, including but not limited to drawings, documents, magnetic media, and models and copies and reproductions thereof.

Id. ¶ 5. The Former Amana Employees each left Amana shortly after the time that Ferrite acquired Amana's assets. Id. ¶ 14. Plaintiffs allege that at the time each Defendant left Maytag's employ, Maytag provided explicit notice of the continuing obligation under the confidentiality agreement. Id.

As part of the sale to Ferrite, Maytag assigned the confidentiality agreements signed by the Former Amana Employees to Ferrite. Id. ¶ 15. Plaintiffs allege that at the time the Former Amana Employees left Maytag's employ, they copied and took with them confidential and proprietary drawings of the Amana industrial microwave ovens that Ferrite had purchased from Maytag. Id. ¶ 16. Plaintiffs allege that the Former Amana Employees did so with knowledge that Maytag had sold the confidential and proprietary drawings to Ferrite. Id. Plaintiffs further allege that the Former Amana Employees took the confidential and proprietary drawings for the purpose of building their own competitive microwave ovens. Id.

Defendants Scheurs, Watt, LeClere, and Allison organized AMTek under the laws of the State of Iowa on February 28, 2003, approximately six weeks after Ferrite purchased Amana's assets. Id. ¶ 17. Plaintiffs allege that AMTek is the vehicle by which the Former Amana Employees have manufactured and sold industrial microwave ovens that they based on the confidential Amana drawings. Id. Plaintiffs contend that the Former Amana Employees and AMTek have contracted with RFT Corp. to manufacture certain components used in these microwave ovens. Id. ¶ 18.³

On December 16, 2004, RFT, LLC, the wholly owned subsidiary of Ferrite, acquired certain assets of RFT Corp. Id. ¶ 19. In the course of negotiations between RFT Corp. and RFT, LLC, RFT Corp. disclosed to Ferrite that RFT Corp. was manufacturing certain products for AMTek based upon AMTek drawings. Id. In January 2005, Ferrite saw the AMTek drawings submitted to RFT Corp. Id. These drawings were prepared by Defendant Nurre, who had also signed a confidentiality agreement with Maytag.⁴ Id. Plaintiffs contend that the AMTek drawings are thinly disguised copies of the confidential and proprietary Amana drawings of microwave components⁵ that Maytag had loaned to RFT Corp. for component production. Id. ¶ 20. Each Amana drawing had been labeled "CONFIDENTIAL PROPERTY OF AMANA. NOT TO BE DISCLOSED TO OTHERS, COPIED, OR USED FOR ANY PURPOSE EXCEPT AS AUTHORIZED IN WRITING. MUST BE RETURNED ON DEMAND, COMPLETION OF ORDER OR OTHER PURPOSE FOR WHICH IT WAS LENT." Id. The AMTek drawings that Plaintiffs contend are copies of the proprietary Amana drawings were labeled "CONFIDENTIAL PROPERTY AMTEK" when they were submitted to RFT Corp. for production. Id. Believing that their proprietary and confidential drawings had been copied and were being used by a competitor, Ferrite apparently directed its newly acquired subsidiary, RFT Corp., to cease producing components for AMTek. In an undated letter,⁶ AMTek sought assurances from RFT Corp. that its three outstanding purchase orders would be completed and shipped on or before February 25, 2005. See Letter from Timothy Scheurs, Sales and Operations, Applied Microwave Technologies, Inc., to George Harris, President, RF Technologies Corporation (attached as Exhibit B to Affidavit of Peter Robicheau (Docket Item No. 43)). The letter stated that

[i]n the event shipment is not received by AMTek with respect to these three purchase orders, by February 25, 2005, AMTek will hold RF Technologies responsible for all damages sustained by AMTek, including costs of cover, consequential and incidental damages, and AMTek may pursue any and all other remedies available to it, including remedies for restraint of trade and unfair trade practices.

Id.⁷

Two days after RFT Corp. received this letter, Plaintiffs filed the instant lawsuit.

II. Personal Jurisdiction

Because this is a diversity case, this Court's authority to exercise personal jurisdiction over a nonresident defendant is limited by the State of Maine's long-arm statute. See Am. Express Int'l, Inc. v. Mendez-Capellan, 889 F.2d 1175, 1178 (1st Cir.1989). Maine's long-arm statute permits jurisdiction over nonresident defendants to the "fullest extent permitted by the due process clause of the United States Constitution." 14 M.R.S.A. § 704-A(1). Consequently, the inquiry focuses on whether assertion of jurisdiction in this case violates due process.

Due process requires that the defendant have "minimum contacts with [the forum] such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940)); see also Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 777, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297-98, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). Such minimum contacts are determined by whether the defendant "purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985).

To establish personal jurisdiction over a nonresident defendant, the plaintiff must demonstrate that the defendant is subject either to "general jurisdiction" or "specific jurisdiction." "[A] defendant who has maintained a continuous and systematic linkage with the forum state brings himself within the general jurisdiction of that state's courts in...