United States District Court, Eastern District of New York
July 29, 1991
HARRISON CONFERENCE SERVICES, INC., PLAINTIFF,
DOLCE CONFERENCE SERVICES, INC., MARENZANA GROUP, INC., DOLCE CONFERENCE SERVICES OF CONNECTICUT, INC., AND DOLCE COMPANY, DEFENDANTS.
The opinion of the court was delivered by: Nickerson, District Judge.
MEMORANDUM AND ORDER
Plaintiff brought this action claiming that defendants have
improperly procured and used plaintiff's trade secrets and
proprietary business information.
Defendants move to dismiss the complaint on the grounds that
1) plaintiff failed to join an indispensable party; 2) the
court lacks personal jurisdiction over defendants; 3) plaintiff
improperly served process; and 4) venue is improper.
Plaintiff cross-moves to hold defendants in contempt for
failure to comply with a preliminary injunction to which they
consented. The preliminary injunction required defendants to
return all documents containing trade secrets and enjoining
them from using the trade secrets disclosed in the documents or
soliciting the customers identified in them.
For the purposes of the motion to dismiss, the court accepts
the facts alleged in the complaint as true.
Plaintiff operates several corporate conference center
facilities nationwide. Until November 1990, it operated a
center in Heritage Village, Connecticut. The center is owned by
Triangulum Associates, ("Triangulum"). Plaintiff operated it
under a management agreement with Triangulum. In September
1990, Triangulum notified plaintiff that it was in default of
the management agreement and that Triangulum was entitled to
terminate it. In the early morning of December 9th, 1990,
Triangulum telecopied a notice of termination to plaintiff and
at the same time, accompanied by uniformed security guards,
physically ousted plaintiff's personnel from the conference
Prior to the takeover, Triangulum had retained Andrew Dolce
and John Marenzana. They are principals of companies, here
named as defendants, which operate conference centers competing
with those operated by plaintiff. Triangulum engaged the
defendant companies to operate the Heritage Village Center
after it ousted plaintiff.
During the takeover, defendants entered the office occupied
by plaintiff's national sales staff and took possession of
documents used by plaintiff to market all of its conference
centers including pricing and occupancy information, customer
files, and customer and employee evaluations. Defendants have
used these documents to gain a competitive advantage over
The complaint makes claims for misappropriation of trade
secrets, unfair competition, and conversion.
Defendants say that the court should dismiss the action under
Rule 19(b) of the Federal Rules of Civil Procedure. They say
that plaintiff has failed to join plaintiff's Connecticut
subsidiary, Harrison Conference Center of Heritage Village,
Inc. ("Harrison-Heritage Village"), and that while the
subsidiary is indispensable to the action, its joinder would
destroy diversity and leave the court without subject matter
Rule 19(b) provides in pertinent part that if a person whose
joinder is sought cannot be made a party;
the court shall determine whether in equity and
good conscience the action should proceed among
the parties before it, or should be dismissed, the
absent person being thus regarded as
indispensable. The factors to be considered by the
court include: first, to what extent a judgment
rendered in the person's absence might be
prejudicial to the person or those already
parties. . . .
Defendants' brief says that Harrison-Heritage Village has
asserted an interest in the trade secrets in an action in
Connecticut state court against Triangulum. They say that a
judgment rendered in the absence of Harrison-Heritage Village
will be prejudicial to them because they are at risk of
multiple liability if it prevails in Connecticut.
Plaintiff responds that Harrison-Heritage Village has no
ownership interest in
the trade secrets, only asserted the claim in Connecticut to
protect plaintiff's interest, and is in the process of
withdrawing the claim.
The court cannot now determine whether Harrison-Heritage
Village has an interest in the trade secrets, and thus cannot
assess defendants' risk of multiple liability. If, as discovery
in the case progresses, it appears that Harrison-Heritage
Village does claim an interest in the trade secrets (if, for
instance, it fails to withdraw that claim in the Connecticut
litigation), defendants may request the court to revisit this
Defendants also say the court has no personal jurisdiction
over them, a defense they preserved in consenting to the
Each defendant is a resident of a state other than New York.
In a diversity case, the court determines personal jurisdiction
over non-residents by the long-arm jurisdictional provisions of
the state in which it sits, see Arrowsmith v. United Press
International, 320 F.2d 219 (2d Cir. 1963), and the limits of
Section 302(a)(3) of the New York Civil Practice Law and
Rules provides a court with jurisdiction over a person who:
commits a tortious act without the state causing
injury to person or property within the state
. . . if he (i) regularly does or solicits
business, or engages in any other persistent course
of conduct, or derives substantial revenue from
goods used or consumed or services rendered, in the
state, or (ii) expects or should reasonably expect
the act to have consequences in the state and
derives substantial revenue from interstate or
The complaint states a claim for a tort occurring outside New
York. Plaintiff claims that the trade secret documents contain
information regarding customers located in New York. If
defendants improperly use the trade secrets to take New York
customers from plaintiff, defendants will cause an injury
within New York, see Cleopatra Kohlique, Inc. v. New High
Glass, Inc., 652 F. Supp. 1254, 1257 (E.D.N.Y. 1987). It is fair
to infer defendants could have foreseen that injury. See Sybron
Corp. v. Wetzel, 46 N.Y.2d 197, 206, 413 N.Y.S.2d 127, 132,
385 N.E.2d 1055, 1060 (1978) (injury foreseeable when New York
customers pursued). Defendants do not dispute that each of them
derives substantial revenue from interstate commerce.
The court has personal jurisdiction over each of the
Defendants argue that the action was brought in the wrong
The Judicial Improvements Act of 1990 included an amendment
to the venue statute. Section 1391(a) of Title 28, which
governs venue in diversity cases, now reads as follows:
A civil action wherein jurisdiction is founded
only on diversity of citizenship may, except as
otherwise provided by law, be brought only in (1)
a judicial district where any defendant resides,
if all defendants reside in the same State, (2) a
judicial district in which a substantial part of
the events or omissions giving rise to the claim
occurred, or a substantial part of the property
that is the subject of the action is situated, or
(3) a judicial district in which the defendants
are subject to personal jurisdiction at the time
the action is commenced."
If Section § 1391(a)(3) means what it says, venue is proper
in this district. All defendants are subject to the court's
jurisdiction. Defendants argue that the court should not read
the subsection literally. They quote from the House of
Representatives Report on the bill that became law.
Subsection 3 is meant to cover the cases in which
no substantial part of the events happened in the
United States and in which all the defendants do
not reside in the same state. This provision would
act as a safety net. . . .
H.R.Rep. No. 734, 101st Cong., 2nd Sess. 23, reprinted in 1990
U.S.Code Cong. & Admin.News, pp. 6860, 6869. Defendants argue
that to interpret subsection (3) to provide venue in other
types of cases would
be to render subsections (1) and (2) superfluous and urge the
court to interpret the statute to give effect to each
If subsection (3) were read to apply to an action with but
one defendant, the other subsections would be plainly
superfluous. But subsection (3) refers not to "a defendant" but
to "the defendants," and the court reads it to apply only in
multiple defendant cases. Such a reading is consistent with the
literal meaning of the words used and renders neither of the
other subsections superfluous. The court should strive to give
effect to all provisions of a statute. See Weinberger v.
Hynson, Westcott and Dunning, Inc., 412 U.S. 609, 633, 93 S.Ct.
2469, 2485, 37 L.Ed.2d 207, 223 (1973). See also Wright, Miller
& Cooper, Federal Practice and Procedure § 3802.1 (1991 Supp.
at 4-5). It is not for a court to assume that Congress did not
appreciate what it was doing. See United States R.R. Retirement
Bd. v. Fritz, 449 U.S. 166, 179, 101 S.Ct. 453, 461, 66 L.Ed.2d
The House Report says that the subsection is meant to cover
the cases where events take place outside the United States. It
does not say that it covers only such cases or that Congress
intended that it should.
Venue is proper in this district.
Defendants say this district is inconvenient because all of
the events underlying the action took place in Connecticut. The
complaint says that defendants are competing unfairly for
plaintiff's customers, many of whom are located in New York.
That is a sufficient contact between this action and this
The court has examined defendants' remaining arguments for
dismissal and finds they have no merit. Defendants' motion to
dismiss the complaint is denied.
Plaintiff has made two separate motions to hold defendants in
contempt for violating the injunction entered on consent.
The first concerned a failure by defendants to return certain
documents they had agreed to return. The court is satisfied
that any withholding of documents was an inadvertent mistake
caused by defendants' change of counsel.
The second concerns defendants' customer solicitation that
plaintiff says violates the injunction. Plaintiff has attached
affidavits of customers who say that defendants have solicited
their business. All of the affiants were customers of the
Heritage Village center, and defendants have solicited their
continued patronage at that center — now managed by
defendants. Plaintiff does not claim that defendants have
solicited for their other centers customers who used the
Heritage Village center or that defendants have solicited
customers who used only plaintiff's other centers.
Defendants' conduct did not violate the injunction.
Presumably they solicited the customers from documents relating
to the Heritage Village center.
Plaintiff sought an injunction from this court claiming that
defendants purloined documents from plaintiff's national sales
office — an office that was both physically and functionally
separate from the business of running the Heritage Village
center. The court does not interpret the complaint to make
claims regarding other documents. It would not be equitable for
the court to enjoin the managers selected by the owner of the
Heritage Village center from using documents generated during
its business to continue that business at that center alone.
The court will not inquire into whether documents relating to
the Heritage Village center belong to plaintiff or to the
owners of the inn. That inquiry would necessarily involve an
interpretation of the management agreement between those
parties. Plaintiff has insisted that the management agreement
is outside the scope of this action.
Plaintiff's motions to hold defendants in contempt are
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