Downhole Technology LLC v. Silver Creek Services Inc. et al, No. 4:2017cv00020 - Document 38 (S.D. Tex. 2017)

Court Description: MEMORANDUM OPINION AND ORDER granting 26 MOTION to Dismiss 20 Amended Complaint pursuant to 12(B)(2) and 12(B)(6). The claims against Defendant Daniel R. Coffee are dismissed without prejudice for lack of jurisdiction. (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)

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Downhole Technology LLC v. Silver Creek Services Inc. et al Doc. 38 United States District Court Southern District of Texas ENTERED IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION DOWNHOLE TECHNOLOGY LLC, May 08, 2017 David J. Bradley, Clerk § § § § § § Plaintiff, v. SILVER CREEK SERVICES INC.; STORMFIELD INNOVATIVE TECHNOLOGIES, LLC; DANIEL R. COFFEE; MICHAEL DIDIER; DILLON W. KUEHL; and CHARLES M. WILLIAMS, Defendants. § § § § § § § § CIVIL ACTION NO. H-17-0020 MEMORANDUM OPINION AND ORDER Pending before 12 (b) ( 2) the and 12 (b) ( 6) court is Defendant Daniel R. Coffee's Motion to Dismiss Amended Complaint and Supporting Memorandum of Law ("Coffee's Motion to Dismiss") (Docket Entry No. 26). For the reasons stated below, the court concludes that personal it lacks jurisdiction over Coffee. The court therefore does not reach Coffee's 12(b) (6) arguments. I. Factual Background A thorough account of the facts of this case can be found in an earlier opinion. 1 ("Downhole") In short, plaintiff Downhole Technology LLC manufactures and deploys frac plugs, some of which were sold to customers FTS International Services, LLC ( "FTSI") and Rice Energy for use at a site in the Marcellus Shale region of 1 Memorandum Opinion and Order, Docket Entry No. 36, pp. 2-4. Pennsylvania (the "FTSI/Rice Site"). The defendants were involved in various aspects of the installation. Downhole alleges that the defendants used confidential information and trade secrets gained from their work on the FTSI/Rice Site to create and market a competing frac plug ("the ZIP Plug") that infringes on patents held by Downhole. Defendant Daniel R. Coffee is a resident of Ohio and former employee of FTSI. Downhole alleges that Coffee "learned detailed information about the Downhole frac plugs from his involvement at the FTSI/Rice Site, and/or [Michael] through [Dillon W.] Kuehl, and/or [Charles M.] Williams. " 2 2013 Coffee, allegedly formed ZIP Plugs. 3 President along with defendants Didier, Silver Creek Services Didier, In December of Kuehl, Inc., and Williams, which markets Coffee is currently the Chief Operating Officer and of Silver "obtained confidential Creek. 4 Downhole alleges information belonging to that Coffee Downhole as a result of Coffee's employment with FTSI," which he then used "to facilitate creation of the ZIP Plug for Silver Creek." 5 "and/ or" 2 the other Defendants Plaintiff' s Amended Coffee also allegedly induced Kuehl, Complaint, Docket Entry No. a 2 01 p. 8 ~ 24. 3 Coffee disputes this, but whether he was involved in Silver Creek from its inception has no effect on the court's conclusions. 4 Id. at 11 ~ 34. 5 Id. at 23 ~ 84. -2- former Downhole employee, to violate a Proprietary Information and Intellectual Property Assignment Agreement (the "Kuehl NDA") . 6 II. A. Applicable Law Standard of Review Dismissal for lack of personal jurisdiction is governed by Federal Rule of Civil Procedure 12(b) (2). moves to dismiss for lack of When a foreign defendant personal jurisdiction under Rule 12 (b) (2), "the plaintiff 'bears the burden of establishing the district court's jurisdiction over the defendant.'" Quick Technologies, Inc. v. Sage Group PLC, 313 F.3d 338, 343 (5th Cir. 2002), cert. denied, Development LLC, 124 S. Ct. 190 F.3d 333, 66 335 (2003) (quoting Mink v. AAAA (5th Cir. 1999)). "When the district court rules on a motion to dismiss for lack of personal jurisdiction 'without an evidentiary hearing, the plaintiff may bear his burden by presenting a prima facie case that personal jurisdiction is proper."' Id. 644, 648 making (quoting Wilson v. (5th Cir.), cert. denied, its determination, the 115 S. Ct. district Belin, 322 20 F. 3d (1994)). "In court may consider the contents of the record before the court at the time of the motion, including 'affidavits, testimony, or discovery.'" 6 Id. at 24 any Id. ~ interrogatories, combination at 344 of the depositions, recognized (quoting Thompson v. 88. -3- methods oral of Chrysler Motors Corp., 755 F.2d 1162, 1165 (5th Cir. 1985)). The court must accept as true the uncontroverted allegations in the plaintiff's complaint and must resolve in favor of the plaintiff any factual conflicts. Guidry v. United States Tobacco Co., 188 F.3d 619, However, 1999) . allegations, 625 (5th Cir. the court is not obligated to credit conclusory even if uncontroverted. Potomac Electric Power Co., Panda Brandywine Corp. 253 F. 3d 865, 869 (5th Cir. v. 2001). "Absent any dispute as to the relevant facts, the issue of whether personal jurisdiction may be exercised over a nonresident defendant is a question of law to be determined by th [e C] ourt." Ruston Gas Turbines, Inc. v. Donaldson Co., Inc., 9 F.3d 415, 418 (5th Cir. 1993). "A federal district court sitting in diversity may exercise personal jurisdiction only to the extent permitted a state court under applicable state law." 278, 281 (5th Cir. 1997), Allred v. Moore & Peterson, 117 F.3d cert. denied, 118 S. Ct. 691 (1998). Moreover, a federal court may only exercise personal jurisdiction over a nonresident defendant if the exercise of personal jurisdiction comports with the Due Process Clause of the Fourteenth Amendment. Id. Thus, the court may exercise personal jurisdiction over a nonresident defendant if " ( 1) the forum state's long-arm statute confers personal jurisdiction over that defendant; and (2) the exercise of personal jurisdiction comports with the Due Process Clause of the Fourteenth Amendment." McFadin v. Gerber, 587 F.3d 753, 759 (5th Cir. 2009), cert. denied, 131 S. Ct. 68 (2010). -4- Since the Texas long-arm statute extends as far as constitutional due process allows, inquiry. B. the court considers only the second step of the Id. Applicable Law Due process is satisfied if the "nonresident defendant has certain minimum contacts with [the forum] such that the maintenance of suit does not offend substantial justice.'" 595 (5th Cir. Washington, 66 S. Ct. 1999) Office 154, 'traditional notions of fair play and Gardemal v. Westin Hotel Co., 186 F. 3d 588, (quoting International Shoe Co. of Unemployment 158 61 S. Ct. 339, 343 (1940)). (1945)) Compensation (quoting and Milliken v. State of Placement, v. Meyer, "The 'minimum contacts' inquiry is fact intensive and no one element is decisive; rather the touchstone is whether the defendant's conduct anticipates being haled into court.'" shows that [he] 'reasonably McFadin, 587 F.3d at 759. a plaintiff satisfies the due process requirement, If a presumption arises that jurisdiction is reasonable, and the burden of proof and persuasion shifts to the defendant opposing jurisdiction to present "a compelling case that the presence of some other considerations would render jurisdiction unreasonable." Burger King Corp. v. Rudzewicz, 105 S. Ct. 2174, 2185 (1985). "There are two types of 'minimum contacts': those that give rise to specific personal jurisdiction and those that give rise to general personal jurisdiction." Lewis v. Fresne, 252 F.3d 352, 358 -5- This case involves specific jurisdiction. 7 A court (5th Cir. 2001). may exercise specific jurisdiction when the nonresident defendant's contacts with the forum state arise from, or are directly related to, the cause of action. County Asphalt. Inc., Gundle Lining Construction Corp. v. Adams 85 F. 3d 201, 205 (5th Cir. 1996) (citing Helicopteros Nacionales de Colombia, S. A. v. Hall, 104 S. Ct. 1868, 1872 n.8 (1984); and Quick Technologies, 313 F.3d 338, 344 (5th Cir. 2002)). Inc. v. Sage Group PLC, To determine whether specific jurisdiction exists, a court must "examine the relationship among the defendant, the forum, and the litigation to determine whether maintaining the suit offends traditional notions of fair play and substantial justice." contact can support "purposefully avails Gundle Lining, 85 F. 3d at 205. specific itself jurisdiction of the if privilege Even a single the of defendant conducting activities within the forum State, thus invoking the benefits and protections of its laws." non-resident's 'purposeful Burger King, 105 S. Ct. at 2183. availment' must be such that "The the defendant 'should reasonably anticipate being haled into court' in the forum state." Ruston Gas Turbines, Inc. v. Donaldson Co., Inc., 9 F.3d 415, 419 (5th Cir. 1993) v. Woodson, 100 (citing World-Wide Volkswagen Corp. s. Ct. 559 (1980)). 7 Downhole does not argue for, and nothing in the record supports, the court's general jurisdiction over Coffee. See Plaintiff's Response in Opposition to Defendant Daniel R. Coffee's 12(b) (2) and 12(b) (6) Motion to Dismiss Amended Complaint ("Response"), Docket Entry No. 35, p. 5 ("This Court has specific personal jurisdiction over Defendant Daniel R. Coffee."). -6- III. Analysis Downhole alleges that personal jurisdiction exists over Coffee ftbecause he is the Chief Operating Officer and President of Silver Creek, a Texas corporation." 8 corporation does not, But Coffee's employment by a Texas alone, contacts with the forum State. establish the requisite minimum See Gustafson v. Provider HealthNet Services, Inc., 118 S.W.3d 479, 483 (Tex. App.-Dallas 2003) mere fact that [Defendant) was employed by a (ft[T)he company with its principal place of business in Texas is not sufficient to establish the requisite minimum contacts with Texas.") 105 S. Ct. 2174). Downhole's (citing Burger King, For the remaining allegations against Coffee in Amended Complaint, Downhole does not identify a connection between the alleged activities and the forum State. Downhole initial occasion, relies on jurisdictional [he) Coffee's affidavit argument. 9 Coffee to supplement states that its ft[o)n traveled to Texas to visit FTSI' s office in Fort Worth, Texas and attend a conference but the majority of [his) work with FTSI was done in Pennsylvania. " 10 ft [t) he majority of 8 p. 11 Plaintiff' s ~ 34. [his) Amended He further states that communications with any of Complaint, Docket Entry the other No. 20 t 9 Plaintiff's Response, Docket Entry No. 35, p. 8. ("By his Motion, Mr. Coffee revealed facts that were unavailable to Plaintiff during the pleading stage, and exemplify why this Court has personal jurisdiction over him.") 10 Affidavit of Daniel R. Coffee, Exhibit A to Coffee's Motion to Dismiss, Docket Entry No. 26-1, p. 7. -7- Defendants in this lawsuit were made while [he] was in Pennsylvania or Ohio." 11 From these statements Downhole reaches the unsupported conclusion that some of Coffee's discussions while in Texas must have involved the alleged misappropriation, 12 arguing that "when a defendant travels to the forum state to learn the trade secrets of Plaintiff and to discuss plans involving those trade secrets, prima facie factual case support, of personal Downhole's jurisdiction exists." 13 conclusory a Without allegation does not constitute a prima facie case for personal jurisdiction. Downhole also argues that it has made a prima facie case for personal jurisdiction over Coffee because his communications "were directed toward Downhole's TUTSA Texas and claim." 14 involved the Downhole facts argues giving that if rise to Coffee communicated with other Defendants located in Texas "to further the misappropriation of Plaintiff's trade secrets, he knew or should have known that Texas." 15 that activity would cause harm to Downhole in But the court must look "to the defendant's contacts with 12 Plaintiff' s Response, Docket Entry No. 3 5, p. 8. (citing Coffee Affidavit, Exhibit A to Coffee's Motion to Dismiss, Docket Entry No. 26-1, p. 7). 13 Id. (citing Stelax Industries, Ltd. v. Donahue, Civil Action No. 03-cv-923, 2004 WL 733844, at *4 (N.D. Tex. Mar. 25, 2004)). 14 Id. at 9. 15 Id. at 10. -8- the forum State itself, not the defendant's contacts with persons who reside there." Walden v. Fiore, 134 S. Ct. 1115, 1122 (2014} (citing International Shoe, 66 S. Ct. 154, 160 (1945}}. Coffee's alleged contacts with the forum State are too tenuous to support specific Coffee jurisdiction. Pennsylvania. 17 resides in Ohio 16 and works in The FTSI/Rice Site where he allegedly obtained Downhole's confidential information was in Pennsylvania. 18 Coffee states that Silver Creek neither maintains nor solicits customers in Texas . 19 Downhole alleges no contradictory facts. The only basis Downhole offers for exercising personal jurisdiction over Coffee is, company. in effect, that his alleged actions harmed a Texas That is insufficient to support specific jurisdiction. Downhole requests that, should personal jurisdiction over Coffee, the court finds it lacks the court either transfer the case or permit Downhole to amend its complaint. The court has discretion to transfer a civil action to another district in which it may have been brought or to which all parties have consented "[f]or the convenience of parties and witnesses, in the interest of justice." 28 u.s.c. § 1404 (a}. Downhole exercise its discretionary powers under 16 § asks 1404 (a} the court to to sever the Coffee Affidavit, Exhibit A to Coffee's Motion to Dismiss, Docket Entry No. 26-1, pp. 5 , 3. 17 Id. at 8 , 19. 18 Id. a t 19 7 ff 11 17 • Id. a t 8 ff II 20 • -9- claims against Coffee and transfer them without argument for why doing so would be for the convenience of parties and witnesses, several of whom likely would be co-defendants action, or in the interest of justice. without prejudice, leaving Downhole in the present Because dismissal will be free to bring its claims against Coffee in another forum, the court concludes that dismissal is appropriate here. And because Downhole has identified no facts that would support the court's personal jurisdiction over Coffee, amendment would be futile. IV. For the Conclusion and Order reasons explained above, the court concludes that Downhole has failed to present a prima facie case for the court's personal jurisdiction over defendant Daniel R. Coffee. Because the court concludes that a transfer would not be in the interest of justice and that amendment of Downhole's complaint would be futile, Defendant Daniel R. Complaint Coffee are Coffee's 12(b) (2) (Docket Entry No. therefore 26) DISMISSED Motion to Dismiss Amended is GRANTED. without The claims against prejudice for lack of jurisdiction. SIGNED at Houston, Texas, on this 8th day of May, 2017. 7 SIM LAKE UNITED STATES DISTRICT JUDGE -10-

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