E-Alert Case Updates

Electronic Communications Into Maryland are Insufficient to Support a Finding of Minimum Contacts for Personal Jurisdiction

Fyfe Co., LLC, et al. v. Structural Group, LLC, et al.
Case No. CCB-13-176 (U.S. District Court for the District of Maryland)
by Joel M. Celso, Summer Associate
Semmes, Bowen & Semmes (www.semmes.com)

In this recent opinion authored by Judge Catherine C. Blake, the U.S. District Court for the District of Maryland determined that it lacked personal jurisdiction over the Defendants – Structural Group, LLC (“Structural”) and individuals who left Fyfe Co., LLC (“Fyfe”) to work for Structural (collectively, the “Defendants”). Accordingly, the Court granted the Defendants’ motion to dismiss.

This case arose out of decisions by individual employees of Fyfe to resign from the company and join Structural, a competitor. Fyfe manufactures constructions systems designed to strengthen, repair, and restore masonry, concrete, steel, and wooden surfaces. The company is incorporated under the laws of Delaware and is headquartered in Missouri. Structural is a Maryland corporation engaged in specialty construction, repair, and maintenance services. Fyfe and Structural had a contractual agreement which gave Structural the right to purchase Fyfe’s products for re-branding and sale. The contract also provided that Structural agreed not to compete with Fyfe.

On January 16, 2013, Fyfe filed a complaint against Structural alleging breach of contract and tort claims against Structural and four (4) former Fyfe executives who had resigned and joined Structural. The complaint alleged that the individual defendants, while employed by Fyfe, engaged in discussions with Structural regarding employment in the fall of 2012. Subsequently, they began copying confidential information and concealed their actions by deleting files and running file cleaning software on the company-issued computers. In October 2012, Structural purchased $2.1 million of manufactured Fyfe products, which Fyfe claimed was an effort to “hoard” in order to compete with Fyfe once the individual defendants joined Structural. In December 2012, all of the individual defendants resigned from Fyfe and joined Structural, but none of them moved to Maryland.

In response to the lawsuit, the Defendants moved to dismiss, arguing that the Court lacked personal jurisdiction under Maryland’s long-arm statute and that jurisdiction failed to comply with the requirements of due process. The Court examined whether the Defendants had sufficient “minimum contacts” in Maryland sufficient to support the exercise of personal jurisdiction and whether the Defendants had purposefully availed themselves of the privilege of conducting activities in Maryland.

The Court determined that there was no evidence that the individual defendants had initiated a relationship with Structural in Maryland. Although they had initiated communications into Maryland by emailing, texting, and telephoning Structural’s vice president, that was insufficient to show that they initiated a relationship with Structural (emphasis original). Further, the Court rejected Fyfe’s argument that the communications demonstrated significant or long-term business activities in Maryland because the content of the communications was largely unknown. Fyfe also argued that a trip taken by the individual defendants in January 2013 to receive training for employment with Structural was sufficient for a finding that the defendants purposefully availed themselves of the privilege of conducting activities in Maryland. The Court disagreed, stating that the single meeting was insufficient because there was no evidence that the individual defendants initiated the relationship with Structural, and the Court had no information about the nature and quality of their communications.

As a last ditch effort to prevent dismissal, Fyfe argued that the Defendants had engaged in a conspiracy; and therefore, the Court had personal jurisdiction under a conspiracy theory of jurisdiction. Because the Court found that Fyfe had failed to state a claim of civil conspiracy, or shown an unlawful meeting of the minds amongst the Defendants, the Court rejected the argument. Accordingly, the Court dismissed the case for lack of personal jurisdiction.