Vapotherm, Inc. v. Santiago

• Decision Date: 28 June 2022
• Docket Number: 21-1567
• Citation: 38 F.4th 252
• Parties: VAPOTHERM, INC., Plaintiff, Appellant, v. Clayton SANTIAGO, Defendant, Appellee, Vero Biotech, LLC, Defendant.
• Court: U.S. Court of Appeals — First Circuit

38 F.4th 252

VAPOTHERM, INC., Plaintiff, Appellant,

v. Clayton SANTIAGO, Defendant, Appellee,Vero Biotech, LLC, Defendant.

No. 21-1567

United States Court of Appeals, First Circuit.

June 28, 2022

Michael S. Lewis, with whom Michael K. O'Neil and Rath, Young and Pignatelli, P.C. were on brief, for appellant.

Brett Walker, with whom Jay Gregory and Gordon Rees Scully Mansukhani, LLP were on brief, for appellee.

Before Thompson, Howard, and Gelpí, Circuit Judges.

GELPÍ, Circuit Judge.

This is an appeal from the district court's dismissal for lack of personal jurisdiction over the Defendant-Appellee, Clayton Santiago ("Santiago"), who was previously employed by the Plaintiff-Appellant, Vapotherm, Inc. ("Vapotherm"). Vapotherm brought suit against Santiago in the District of New Hampshire, alleging that he breached his employment contract and violated a Non-Solicitation of Employees Clause by encouraging three Vapotherm employees to leave the company and join him at his new employment, Vero Biotech, LLC ("Vero"). We affirm.

I. Background

Santiago was employed by Vapotherm for approximately four years, beginning in January 2016 and ending in February 2020. Vapotherm is a publicly traded medical device manufacturing company. It is a Delaware corporation with its principal place of business in New Hampshire. Santiago was employed primarily as an account manager for Vapotherm, and was specifically assigned to the territory within the State of Georgia.¹ Throughout the entirety of his employment with Vapotherm and at all other relevant times, Santiago resided in Georgia. In February 2020, Santiago left Vapotherm to work for Vero, and continues to work there as a Regional Engagement Director.

Prior to beginning his employment with Vapotherm, Santiago signed a "Confidentiality, Non-Compete, and Assignment of Inventions Agreement" ("Agreement"). The Agreement included a choice-of-law clause for the State of Maryland but did not include a forum selection clause. Among other things, the Agreement contained a Non-Solicitation of Employees Clause, which prohibited Santiago from "solicit[ing] or encourag[ing] any employee of the Company to terminate his or her employment with the Company or to accept employment with any subsequent employer with whom Employee is affiliated in any way" throughout his employment and for one year thereafter. The Agreement was signed by Santiago and John Landry, Vapotherm's Chief Financial Officer ("CFO").

Vapotherm alleges in its complaint that Santiago violated the non-solicitation clause of the Agreement by encouraging three of its former employees to join him at Vero after he left Vapotherm. These three employees -- Benjamin Lonsway ("Lonsway"), Ryan Philpot ("Philpot"), and Kurt Wong ("Wong") -- were all clinical managers for Vapotherm during their employment.² Lonsway was based in Georgia, while Wong and Philpot were both based in Florida. Santiago knew all three employees, and indeed supervised Lonsway and Wong for a few months. He later worked in an oversight role with all three. On November 24, 2020, Lonsway, Philpot, and Wong all submitted their letters of resignation to Vapotherm and subsequently began working for Vero as clinical educators.³ Vapotherm alleges that Santiago solicited these employees to leave the company and join him at Vero in violation of the Agreement.

During the course of his employment with Vapotherm, Santiago had limited contact with the State of New Hampshire, primarily arising from his communications with the company's headquarters in Exeter. Santiago testified in his deposition that during his four-year period of employment with Vapotherm, he visited New Hampshire five to seven times to attend corporate events, and in total spent approximately two weeks there. Santiago communicated with Vapotherm's customer service representative, located in New Hampshire, about once a month to process purchase orders and other paperwork. He also communicated infrequently with Vapotherm's technical support as well as its human resources department. The product which Santiago sold, the Precision Flow, was manufactured in New Hampshire. He was paid via direct deposit by Vapotherm, and stated in his deposition that he was unsure where Vapotherm's banks were located.

Apart from these contacts, Santiago's work for Vapotherm was primarily focused in the Southeast of the United States. During the hiring process, after being contacted by a recruiter, Santiago was interviewed in Atlanta, Georgia and Chicago, Illinois. Throughout his employment, his direct supervisors were located in Charleston, South Carolina. Santiago oversaw the company's operations and employees located in Georgia and Florida.

Vapotherm originally filed suit against both Vero⁴ and Santiago in the District of New Hampshire, alleging that Santiago had violated the Agreement's non-solicitation clause, and brought claims against him for breach of contract, intentional interference with contractual relations, and unjust enrichment, as well as requests for injunctive relief, specific performance, and a declaratory judgment that Santiago breached the Agreement. Following Santiago's challenge to personal jurisdiction over him, the district court ordered limited jurisdictional discovery.⁵ Upon conclusion thereof, the district court agreed with Santiago. This appeal followed.

II. Discussion

A. Standard of Review

"When a court's personal jurisdiction over a defendant is contested, the plaintiff has the ultimate burden of showing by a preponderance of the evidence that jurisdiction exists." Adams v. Adams, 601 F.3d 1, 4 (1st Cir. 2010) (citing Ealing Corp. v. Harrods Ltd., 790 F.2d 978, 979 & n.1 (1st Cir. 1986) ). "Faced with a motion to dismiss for lack of personal jurisdiction, a district court ‘may choose from among several methods for determining whether the plaintiff has met [its] burden.’ " Adelson v. Hananel, 510 F.3d 43, 48 (1st Cir. 2007) (alteration in original) (quoting Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42, 50-51 (1st Cir. 2002) ). Here, the district court applied the prima facie method, using the parties' proffered evidence to determine whether personal jurisdiction over Santiago was proper. The parties engaged in limited discovery as to the jurisdictional issue. We review both the use of the prima facie method and the decision to grant the motion to dismiss de novo. Id.

Neither party disputes the district court's use of the prima facie method to resolve the motion to dismiss for lack of personal jurisdiction. However, Vapotherm argues that the district court applied the incorrect standard by weighing evidence, making findings of fact, and ignoring its evidentiary proffers in support of personal jurisdiction over Santiago. Vapotherm alleges that the district court should have construed its evidence "in the light most congenial to [its] jurisdictional claim." Mass. Sch. of L. at Andover, Inc. v. Am. Bar Ass'n, 142 F.3d 26, 34 (1st Cir. 1998). Vapotherm further adduces that crediting Santiago's version of the events is the only way the district court could have reached its conclusion.

The prima facie approach does not require that we "credit conclusory allegations or draw farfetched inferences." Ticketmaster-N.Y., Inc. v. Alioto, 26 F.3d 201, 203 (1st Cir. 1994). Instead, "[t]he prima facie showing of personal jurisdiction must be based on evidence of specific facts set forth in the record." Boit v. Gar-Tec Prods., Inc., 967 F.2d 671, 675 (1st Cir. 1992) (citing Kowalski v. Doherty, Wallace, Pillsbury & Murphy, 787 F.2d 7, 9 (1st Cir. 1986) ). "Although the burden of proof is light, [the plaintiff] may not rely on the mere allegations of its complaint, but must point to specific facts in the record that support those allegations." Jet Wine & Spirits, Inc. v. Bacardi & Co., 298 F.3d 1, 8 (1st Cir. 2002) (citing Daynard, 290 F.3d at 51 ). Vapotherm "must go beyond the pleadings and make affirmative proof." Boit, 967 F.2d at 675 (quoting Chlebda v. H.E. Fortna & Bro., 609 F.2d 1022, 1024 (1st Cir. 1979) ).

The district court correctly applied the prima facie standard in its decision. The majority of Vapotherm's arguments on this point seem to concern the district court's ultimate conclusion as to the motion to dismiss rather than its method of reaching that conclusion. Specifically, Vapotherm relied primarily on Santiago's deposition testimony and its complaint to establish important jurisdictional matters, such as where Santiago was paid from and where his employment contract was executed, rather than providing affirmative proof and developing specific record facts to support its argument on these points. As we shall discuss henceforth, the district court properly considered the limited evidence Vapotherm proffered in ruling on the motion to dismiss.

B. Personal Jurisdiction

The district court found that there were insufficient minimum contacts to exercise personal jurisdiction over Santiago in New Hampshire. Neither party disputes the district court's finding that there is no general in personam jurisdiction over Santiago. Therefore, the district court only evaluated the exercise of specific personal jurisdiction over him.

In a case such as this one, the federal court sitting in diversity must determine whether the defendant's contacts with the state satisfy both the state's long-arm statute as well as the Due Process Clause of the Fourteenth Amendment. Sawtelle v. Farrell, 70 F.3d 1381, 1387 (1st Cir. 1995). New Hampshire's long-arm statute permits jurisdiction over a defendant who "transacts any business within [New Hampshire]" or "commits a tortious act within [New Hampshire]." N.H. Rev. Stat. Ann. § 510:4, I. "[T]he Supreme Court of New Hampshire interpreted the latter phrase to include situations where a defendant's out-of-state activity results in an injury within New Hampshire," precisely what Vapotherm alleges occurred here. Sawtelle, 70 F.3d at 1388 (citing Estabrook v. Wetmore, 129...