United States District Court, N.D. New York
March 8, 2004.
PST SERVICES, INC. and PER-SE TECHNOLOGIES, INC., Plaintiffs,
LEE M. LARSON III; BRADLEY C. CLARK; KIMBERLEE A. GIRARD, JANISE LIU and RANDALL COLLINS CLARK, Defendants
The opinion of the court was delivered by: HOWARD MUNSON, Senior District Judge Page 2
MEMORANDUM DECISION AND ORDER
Per-Se Technologies, Inc., (Per-Se), is a corporation that provides,
through its subsidiary, PST Services, Inc., ("PST"), various services and
solutions to physicians and health care organizations that are devised to
make their businesses more efficient and optimize their revenue. In a
portion of its business, PST operates an Academic & Multi-Specialty
Services Group (the "Academic Group") that is focused on providing
billing and accounts receivable management services to physician faculty
practices and office based physician practices across the country. Per-Se
company handbook suggested that an employee desiring to leave the
company's employment give four weeks notice of his/her intention to do
Plaintiff's claim that defendant Randy Clark was employed by PST in its
Academic Group as a Senior Systems Engineer. In this position this
defendant had knowledge and access to plaintiffs' confidential business
and financial information and trade secrets as well as direct contact
with representatives of one or more of plaintiffs customers.
On Thursday, July 3, 2003, defendant Randy Clark and six other
employees tendered resignation letters to plaintiffs. On the same date,
Randy Clark refused to advise plaintiffs of his future employment or
business plans, but it did come to light that day that the group of seven
were going to all work for a competitor. Subsequently, plaintiffs learned
that the group had planned this competing business while they were
employed at PST.
In his resignation letter, defendant Randy Clark pledged to company
policy by working a four week notice period before terminating his
employment. However, during the week of July 13, 2003, while still
employed and paid by plaintiffs, defendant Randy Clark traveled with the
other members of the group of seven to Crouse Hospital in Syracuse, New
York to conduct business meetings related to their new business venture.
Plaintiffs were unaware of this meeting, and, if they were, would not
have authorized defendants to attend it.
Not only did the group of seven conduct business on behalf of their new
commercial enterprise in Syracuse, New York, they also actively solicited
coworkers to resign from jobs with the Academic Group and join them in
their new firm. Furthermore, the group of seven actively solicited one or
more of plaintiffs' customers to shift their business away from
plaintiffs to their new company. Plaintiffs also learned that before
returning their company-owned laptop computers, several members of the
group of seven, including defendant Randy Clark, intentionally, and
without authorization, deleted information from those computers in
violation of company policy.
Plaintiffs instituted this diversity action alleging that these actions
by the group of seven were improper, unlawful and compelled them to
institute this lawsuit. The complaint sets forth claims for breach of
fiduciary duties, tortuous interference with contract and advantageous
business relations, misappropriation and disclosure of trade secrets and
confidential business information, and civil conspiracy. The action was
brought in this court because the Syracuse meeting where the group of
seven furthered their unlawful conspiracy is located in the Northern
District of New York. Plaintiffs seek injunctive relief, an
accounting of profits lost due to defendants conduct, return of
plaintiffs' property, actual, compensatory and punitive damages,
attorneys' fees and cost.
Plaintiffs name five defendants in the complaint, Lee M. Larson III,
Bradley C. Clark, Kimberlee A. Girard, Janise Liu, and Randall Collin
Clark. Defendant Janise Liu is not a party in the motions currently
pending before the court.
Defendants Lee Larson, Bradley Clark and Randall Collin Clark each
maintain that they were employed by Per-Se until July 3, 2003, when each
tendered his letter of resignation that included the four week notice as
suggested by the employees' rule book. At the time of their resignations,
all three were employees at will and, as such, not required to give any
notice prior to resigning. Upon tendering their resignations to the
President of Per-Se, Frank Murphy, each was advised that he was
terminated and to leave the premises at once without taking any personal
property from the office. All three turned over all company property they
were then possessing. Defendant Girard also tended her letter of
resignation on July 3, 2003. The letter contained the four week notice of
leaving the company's employ provision although as an at will employee
she was not required to provide any notice of her resignation. When she
reported for work on Monday, July 7, 2003, she was instructed by
plaintiffs' Human Resources Department that her employment was terminated
immediately and to leave the premises without collecting her personal
property. She turned over any company property in her possession.
During the period July 8-11, each of these four defendants received an
offer from Per-Se of four weeks employment at Per-Se's Atlanta, Georgia
office. Each defendant declined the offer.
The defendants then attended the meeting held in Syracuse, New York
during the week of July 13, 2003 for the purpose of software training in
connection with their new employment. Syracuse, New York was selected as
the meeting location because it was the only site the software vendor's
training personnel had available to provide the necessary training at
that time. This meeting did not involve any substantive discussions
regarding the operations, management, or marketing of their new employer.
None of the defendants received salary payments by Per-Se during the time
period of the meeting.
The court has before it three almost identical motions which seek
dismissal of the complaint pursuant to Rule 12(b)(2) of the Federal Rules
of Civil Procedure for lack of personal jurisdiction. One motion was
filed by defendants Lee Larson, Kimberlee Girard and Bradley Clark, a
second by defendant Randall Clark, and the third by defendant Janise Liu.
The Larson/Girard/ Bradley Clark motion originally included a proposed
alternative disposition to transfer venue to the Northern District of
Georgia under 28 U.S.C. § 1404, however, this alternative request was
withdrawn from the motion by these defendants on September 25, 2003.
Defendant Kimberlee A. Girard also claims that the court lacks personal
jurisdiction over her because she was not properly served as required by
Rule 4 of the Federal Rules of Civil Procedure and the New York Civil
Practice Law and Rules § 308.
The defendants were all employed by plaintiff, resigned their positions
with four weeks notice, were then immediately terminated, declined
plaintiff's subsequent offer to re-hire them for four weeks, became
employed by a company that competes with plaintiff, and attended the
meetings in Syracuse, NY.
Plaintiffs have entered opposition to each of these motions.
Where the basis of federal jurisdiction is diversity of citizenship, a
federal court in this state applies New York law to determine whether
personal jurisdiction over the defendant may be exercised CutCo
Industries. Inc., 806 F.2d at 365. Under New York's long arm
statute, Civil Practice Law and Rules ("CPLR") § 302(a), the
pertinent sections of this statute applicable to the instant case are, "
a court may exercise jurisdiction over a non-domiciliary defendant who
(1) transacts any business within the state or contracts anywhere to
supply goods or services in the state; or (2) commits a tortuous act
within the state." "If the exercise of jurisdiction is appropriate under
the long arm statute, the court must decide whether such exercise
comports with the requisites of due process." Bensusan Restaurant
Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997). While the person
asserting jurisdiction under the long arm statute has the burden of
establishing personal jurisdiction, Armouth International. Inc. v.
Haband Company, 277 A.D.2d 189, 190, 715 N.Y.S.2d 438, 439 (2d Dept.
2000), only prima facie showing of personal jurisdiction is
required at the pleading or motion stage. Tripmasters. Inc. v.
Hayatt International Corp., 696 F. Supp. 925, 930 (S.D.N.Y. 1988).
Furthermore, the court in deciding this issue at this stage must construe
the facts in the light most favorable to the non-moving party, in this
the plaintiff's. Interface Remedial Laboratories Corp. v.
Axiom Medical, Inc., 600 F. Supp. 731, 735 (E.D.N.Y. 1985).
Although a prima facie showing must be made in order to
withstand a motion to dismiss for lack of personal jurisdiction, New York
law entitles plaintiffs to conduct discovery without having made a
prima facie showing provided that plaintiffs have made a
sufficient start toward establishing jurisdiction, and have shown that
their position is not frivolous. Manhattan Life Insurance Company v.
A.J. Stratton Syndicate, 731 F. Supp. 587, 593 (S.D.N.Y. 1990). The
court therefore has discretion to order discovery even though plaintiffs
have not made a prima facie showing. Grove Valve &
Regulator Company v. Iranian Oil Services, 87 F.R.D. 93, 96 n. 3
(S.D.N.Y. 1980)("Plaintiffs must make a threshold showing that discovery
might uncover a basis for jurisdiction; but if no such possibility
exists, to permit discovery would not be proper.").
Consequently, to withstand a motion to dismiss at this stage and
qualify for an order of discovery, plaintiffs must show that their
position is not frivolous and that they have made a sufficient start
toward establishing personal jurisdiction. To make such a showing,
plaintiffs must demonstrate that facts supporting personal jurisdiction
may exist that discovery should draw out. Sultanik v. Cobden
Chadwick, Inc., 94 F.R.D. 123 (E.D.N.Y. 1982)(light burden on
plaintiff is satisfied by stating facts in the complaint and other papers
sufficient to support a reasonable inference that defendant may be
subject to personal jurisdiction within the state).
Given that plaintiffs have shown that defendants may have still been
their employees at the time of the Syracuse, New York meetings and that
business may have been transacted and torts committed during the time
period in which the meetings were held, the court finds that the
plaintiffs have met the light burden of showing a non-frivolous position
and a sufficient start on establishing personal jurisdiction. These
issues must be resolved in order to determine whether this court had
personal jurisdiction over the defendants. While some discovery has taken
place, the court finds that further discovery is warranted.
Accordingly, Defendants motions to dismiss the complaint pursuant to
Fed.R. Civ. P12(b)(2) for lack of personal jurisdiction is
DENIED without prejudice; Magistrate Judge DiBianco's order of
October 23, 2003 staying discovery is herewith dissolved; and the parties
are given a 90 day period commencing on the date of this Order, for
limited discovery on the issue of personal jurisdiction, the respective
parties will then have 30 days from the close of discovery to bring any
IT IS SO ORDERED.
© 1992-2004 VersusLaw Inc.