Sleep No. Corp. v. Young
| Decision Date | 16 December 2020 |
| Docket Number | Case No. 20-CV-1507 (NEB/ECW) |
| Citation | 507 F.Supp.3d 1081 |
| Parties | SLEEP NUMBER CORPORATION, Plaintiff, v. Steven Jay YOUNG, Carl Hewitt, and UDP Labs, Inc., Defendants. |
| Court | U.S. District Court — District of Minnesota |
Andrew S. Hansen, Lukas Dustin Jonathon Toft, Natalie I. Uhlemann, Randall J. Pattee, Fox Rothschild LLP, Minneapolis, MN, for Plaintiff.
Brandon J. Wheeler, David L. Hashmall, Lauren M. Weber, Felhaber, Larson, Fenlon & Vogt, PA, Minneapolis, MN, Indra Neel Chatterjee, Pro Hac Vice, Goodwin Procter LLP, Redwood City, CA, James Lin, Pro Hac Vice, Rachel M. Walsh, Pro Hac Vice, Goodwin Procter LLP, San Francisco, CA, for Defendants.
Nancy E. Brasel, United States District Judge This matter is before the Court on Defendants’ motion to dismiss for lack of personal jurisdiction, improper venue, and failure to state a claim, or in the alternative to transfer venue under 28 U.S.C. § 1404(a). (ECF No. 54.) For the reasons that follow, the Court denies the motion in part and grants it in part.
Plaintiff Sleep Number Corporation ("Sleep Number") is a Minnesota corporation that sells, among other things, adjustable beds. Some of Sleep Number's beds include SleepIQ technology, a biometric monitoring system that can sense a variety of physiological signals of its occupant. (Id. ¶¶ 13, 15, 16.) Sleep Number developed part of this technology in partnership with BAM Labs, a California company for which Defendants Young and Hewitt both worked. (Id. ¶ 26.) In 2015, Sleep Number acquired BAM Labs and renamed it SleepIQ LABS. (Id. )
After the acquisition, Young and Hewitt continued to work for SleepIQ LABS; Young as the Chief Technology Officer and Hewitt as the Vice President of Engineering. (Id. ) In these roles, Young and Hewitt worked on SleepIQ technology and other product development ideas. (Id. ¶ 42.) As a result, they had access to Sleep Number's confidential information and intellectual property. (Id. )
In November 2017, Young and Hewitt told Sleep Number that they wished to become consultants rather than employees. (Id. ¶ 27.) Roughly a month later, Young and Hewitt entered into consulting agreements, which acknowledged that Young and Hewitt wished to pursue an "alternative business venture." (Id. ¶¶ 28–29.) The next month, Young and Hewitt incorporated their venture and named it UDP Labs ("UDP"). (Id. ¶ 30.)
Meanwhile, Young and Hewitt also continued their work as Sleep Number consultants from California, reporting to Annie Bloomquist, who is based in Minnesota. (ECF No. 76 ¶ 12.) They still had access to Sleep Number's confidential information, some of which was stored in Minnesota. (Id. ) They were paid from Minnesota and were in frequent contact with Sleep Number's Minnesota-based personnel. (Id. ¶¶ 13–14.)
Young and Hewitt also continued their UDP venture, and from October 2018 to January 2020, UDP filed four provisional patent applications ("Inventions"). (Compl. ¶¶ 46, 56, 57, 59, 76.) All four patent applications are for inventions that involve placing sensors under a substrate, such as a bed, to measure and predict sleep patterns, bed exits, weight changes, and blood flow. (Id. ¶¶ 77–96.) Sleep Number claims ownership of these patent applications based on Young and Hewitt's consulting agreements, which require them to assign their rights to almost any inventions they developed during their consultancy to Sleep Number.1 (Id. ¶¶ 100–02.) In November 2018, Young and Hewitt notified Sleep Number that they would be terminating their consulting agreements. (Id. ¶ 49.)
Sleep Number now alleges that Young and Hewitt breached their consulting agreements by not notifying and assigning their rights in the Inventions to Sleep Number. (Id. ¶¶ 119–36.) Sleep Number also brings claims of conversion, violation of federal and state trade secret statutes, and tortious interference with contract. (Id. ¶¶ 137–73.) In addition, Sleep Number seeks a declaratory judgment that it owns the Inventions, and specific performance requiring Young, Hewitt, and UDP to amend their patent applications to reflect Sleep Number's ownership of the Inventions. (Id. ¶¶ 97–118, 174–80.)
Defendants move to dismiss on three bases: (1) the Court lacks personal jurisdiction over them; (2) Minnesota is an improper venue; and (3) several of Sleep Number's claims fail to state a claim on which relief may be granted. (ECF No. 54.) In the alternative, Defendants seek to have this case transferred to the Northern District of California. (Id. ) The Court concludes that it has personal jurisdiction over Defendants, Minnesota is a proper venue for this matter, the case should not be transferred, and only Sleep Number's tortious interference claim should be dismissed.
Sleep Number's claims should not be dismissed if the pleadings, viewed in the light most favorable to it, are sufficient to support the exercise of jurisdiction over Defendants. Creative Calling Sols., Inc. v. LF Beauty Ltd. , 799 F.3d 975, 979 (8th Cir. 2015). "A federal court in a diversity action may assume jurisdiction over nonresident defendants only to the extent permitted by the long-arm statute of the forum state and by the Due Process Clause." Dever v. Hentzen Coatings, Inc. , 380 F.3d 1070, 1073 (8th Cir. 2004) (quoting Morris v. Barkbuster, Inc. , 923 F.2d 1277, 1280 (8th Cir. 1991) ). As "Minnesota's long-arm statute authorizes courts to exercise jurisdiction to the full extent" of due process, the two prongs of the analysis collapse into a single due process inquiry. Pederson v. Frost , 951 F.3d 977, 980 (8th Cir. 2020). To comport with due process, a non-resident defendant must have sufficient contacts with the forum state such that exercising jurisdiction over him or her does not offend traditional notions of fair play and substantial justice. Wells Dairy, Inc. v. Food Movers Int'l, Inc. , 607 F.3d 515, 518 (8th Cir. 2010).
The Eighth Circuit has set forth the following five-factor test to guide the due process inquiry: "(1) the nature and quality of defendant's contacts with the forum state; (2) the quantity of those contacts; (3) the relation of the cause of action to the contacts;" (4) the forum state's interest in providing a forum for its residents; and "(5) the convenience of the parties." Id. (citation omitted). Of these, the first three are afforded greater weight. Datalink Corp. v. Perkins Eastman Architects, P.C. , 33 F. Supp. 3d 1068, 1073 (D. Minn. 2014).
There are two types of personal jurisdiction: general and specific. Bristol-Myers Squibb Co. v. Sup. Ct. of Cal., San Francisco Cnty. , ––– U.S. ––––, 137 S. Ct. 1773, 1780, 198 L.Ed.2d 395 (2017). "For an individual, the paradigm forum for the exercise of general jurisdiction is the individual's domicile." Goodyear Dunlop Tires Operations, S.A. v. Brown , 564 U.S. 915, 924, 131 S.Ct. 2846, 180 L.Ed.2d 796 (2011). For a corporation, it is where the corporation is "fairly regarded as at home"—usually where the corporation is incorporated and where it has its principal place of business. Id. The parties do not dispute that the Court lacks general jurisdiction over Defendants—neither Young nor Hewitt live in Minnesota, and UDP is neither incorporated nor headquartered in Minnesota. Thus, if the Court has personal jurisdiction over defendants, it must be based on a finding of specific jurisdiction. Specific jurisdiction may only be exercised where the suit arises out of or relates to the defendant's contacts with the forum. Id. at 1780 ; Myers v. Casino Queen, Inc. , 689 F.3d 904, 912 (8th Cir. 2012) (). The Court finds that it has specific jurisdiction over all three defendants.
The quality and quantity of Young and Hewitt's contacts with Minnesota and the connection between those contacts and Sleep Number's claims are sufficient to establish this Court's specific jurisdiction over them. Taking Sleep Number's allegations as true, Young and Hewitt negotiated their consulting agreements, the breaches of which are at issue, at least in part, in Minnesota. (Compl. ¶ 27.) Young and Hewitt traveled to Minnesota on several occasions for work meetings.2 (Id. ; ECF No. 75 ¶¶ 6, 8.) Their immediate supervisor was based in Minnesota. And they used laptops issued by Sleep Number, through which they had access to Sleep Number's confidential information and intellectual property. (Compl. ¶ 42–43.)
Courts have routinely found such contacts to be sufficient to confer personal jurisdiction. See, e.g. , ProMove, Inc. v. Siepman , 355 F. Supp. 3d 816, 822 (D. Minn. 2019) (); Custom Conveyor Corp. v. Hyde , 237 F. Supp. 3d 895, 900–01 (D. Minn. 2017) (); Travel Leaders Leisure Grp., LLC v. Cruise & Travel Experts, Inc. , No. 19-CV-2871 (SRN/ECW), 2020 WL 4604534, at *8–*9 (D. Minn. Aug. 11, 2020) ().
The cases Defendants cite are largely inapposite. In Sybaritic, Inc. v. Interport International, Inc. , the court held that there was no jurisdiction over a company whose only contact with Minnesota was its president's two-day trip to Minnesota and where the contract giving rise to the cause of action was "negotiated, drafted, and apparently executed" in...
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