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Transclick, Inc. v. Rantnetwork, Inc.

United States District Court, Second Circuit

August 7, 2013

TRANSCLICK, INC., Plaintiff,
v.
RANTNETWORK, INC. et al., Defendants.

MEMORANDUM ORDER

LAURA TAYLOR SWAIN, District Judge.

Plaintiff Transclick, Inc. ("Plaintiff" or "Transclick") sues Defendants Rantnetwork, Inc., Appletworks, Neven Boyanov Boyanov, Interlecta, Frank Edward Fleming ("Fleming"), Edward Cavazos ("Cavazos"), and C&A Inc., [1] seeking injunctive relief and damages in connection with a number of claims, including enforcement of covenants not to compete and not to solicit, breach of fiduciary duty, breach of employment agreement, misappropriation of trade secrets, unfair business practices, civil conspiracy, patent infringement, and copyright infringement. Cavazos and Fleming (collectively, "Defendants") move, pursuant to Federal Rule of Civil Procedure 12(b)(5), to dismiss Plaintiff's claims for insufficient service of process. Cavazos also moves, alternatively, pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(3), to dismiss Plaintiff's claims for lack of personal jurisdiction and improper venue. The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331 and 28 U.S.C. § 1332.

The Court has reviewed thoroughly all of the parties' submissions and arguments. For the following reasons, the Court grants Defendants' motions to dismiss the Complaint.

BACKGROUND[2]

Plaintiff initiated this action on November 14, 2011 and, on April, 10, 2012, sent a letter to the Court explaining that Plaintiff could not effectuate traditional service of process because Plaintiff could not locate Defendants' mailing address through "FOIA requests to the U.S. Post Office and wide ranging computer searches." (Docket Entry No. 10.) Plaintiff requested permission from the Court to effectuate alternative service through "R-Post', a company that serves legal documents through certified e-mail." (Id.) On April 17, 2012, the Court issue an order directing Plaintiff to file additional information regarding the necessity of alternative service.[3] (Docket Entry No. 9.) Plaintiff, in a letter dated May 3, 2012, submitted to the Court, as proof of its attempts to serve Defendants, copies of letters sent to the Postmasters of California and New York as well as a letter from Plaintiff's process server stating that it could not locate Defendants. At a status conference, on May 11, 2012, the Court considered Plaintiff's request for approval of alternative service and directed Plaintiff to file a renewed request for alternative service with supplementary information, including the availability of proof that any R-Post email was actually opened, not just that it was received by a computer server.

On September 28, 2012, Plaintiff reached a settlement with Defendants Optimum Consulting Group, Ltd., Estate of William J. Grandizio, Elisa R. Grandizio, Rantnetwork, Inc., and Kenneth E. Volet, and this action was terminated. (See Docket Entry Nos. 42, 46.) However, on December 20, 2012, Plaintiff requested that the Court restore this action against Defendants Appletworks, Neven Boyanov Boyanov, Interlecta, Frank Edward Fleming, Edward Cavazos, C & A Inc., and Fred Schnurr.[4] (Docket Entry No. 45.) By endorsed Order dated December, 21, 2012, the Court restored this action as against those defendants, but ordered that Plaintiff file proof of service against each remaining Defendant by February 8, 2013, or the action against them would be dismissed without prejudice. (Id.) On January 13, 2013, Plaintiff sent a letter to the Court representing that it had properly served Defendants Cavazos and Fleming in accordance with the direction given by the Court at the May 11, 2012, conference. (Docket Entry No. 47.) The Court accepted the letter and attachments as certification of service on these Defendants. (Id.)[5]

Plaintiff is a Delaware wireless and PC based web services and social mobile infrastructure company with its corporate headquarters in New York. (Compl. ¶ 1.) In the Complaint, Plaintiff asserts that it employed Fleming as Vice President of Business Development from September 2006 until April 2007, when Fleming co-founded Interlecta, LLC, another software, network access, and mobile services company. (Id. ¶¶ 2, 14.) Plaintiff alleges that Fleming misappropriated Transclick's technology by integrating proprietary codes developed for and owned by Plaintiff. (Id. ¶ 14.) Fleming, Plaintiff further contends, currently offers Plaintiff's real-time machine translation technology on the open market for his own pecuniary gain. (Id.)

According to the Complaint, Plaintiff employed Cavazos as Executive Vice President of Global Sales of Plaintiff from July 19, 2005, until December 20, 2005. (Id. ¶ 17.) Plaintiff asserts that Cavazos signed a confidentiality agreement and an employment agreement that contained non-competition and confidentiality provisions (collectively, the "Employment Agreements") on July 19, 2005. (Id. ¶¶ 17, 85.) In December 2005, Cavazos left Transclick and began employment at Telelanguage. (Id.¶ 91.) At Telelanguage, Plaintiff alleges, Cavazos misappropriated Transclick's real-time machine translation technology and marketed the technology through Rantnetwork, a Pennsylvania-based company. (Id. ¶¶ 2, 91.) According to Plaintiff, in violation of provisions in the Employment Agreements with Transclick, Cavazos also arranged and caused a license agreement to be executed between Telelanguage and LEC Corporation, a machine translation licensing company, and shared the licensing key with Rantnetwork and Neven Boyanov Boyanov. (Id.) Plaintiff alleges that, as a result of Cavazos' conduct, it has been irreparably harmed and is unable to protect its business proprietary information and to fairly compete in the market. (Id. ¶¶ 93, 94.)

Plaintiff brings this action under 28 U.S.C. § 1331 and 28 U.S.C. § 1332, seeking injunctive relief and damages. Plaintiff asserts the following contract-based claims against Cavazos: Enforcement of Covenants to Not Compete and to Not Solicit (Count 1), Enforcement of Covenants Not to Compete and Not to Solicit (Count 4), and Breach of Employment Agreement (Count 12). (Id. ¶¶ 102-15, 112-14, 144-48.) Plaintiff also asserts the following tort claims against Cavazos: Breach of Fiduciary Duty (Count 8), Misappropriation of Trade Secrets (Count 21), Unfair Business Practices (Count 22), Civil Conspiracy (Counts 23), Patent Infringement of United States Patent No. 6.996.520 (Counts 25 to 29), and Copyright Infringement Under 17 U.S.C. § 101 (Count 30). (Id. ¶¶ 127-32, 163-69, 170-78, 179-82, 188-224, 225-34.) Plaintiff asserts substantially the same contract and tort claims against Fleming. (Id. ¶¶ 109-11, 121-26, 139-43, 170-78, 179-82, 188-224, 225-34.)

DISCUSSION

Service of Process on Defendants

"[I]n considering a motion to dismiss pursuant to [Rule] 12(b)(5) for insufficiency of [service of] process, a Court must look to matters outside the complaint to determine whether it has jurisdiction.'" Koulkina v. City of New York , 559 F.Supp.2d 300, 311 (S.D.N.Y. 2008) (quoting Darden v. DaimlerChrystler N. Am. Holding Corp. , 191 F.Supp.2d 382, 387 (S.D.N.Y. 2002)). "When a defendant raises a Rule 12(b)(5) challenge to the sufficiency of service of process, the plaintiff bears the burden of proving its adequacy.'" Id . (quoting Mende v. Milestone Tech., Inc. , 269 F.Supp.2d 246, 251 (S.D.N.Y. 2003)). "Conclusory statements that a defendant was properly served are insufficient to overcome a defendant's sworn affidavit that he was never served with process." McNulty v. Yaneka, No. 11 Civ. 8320(ER), 2013 WL 684448, at *3 (S.D.N.Y. Feb, 25, 2013). Where process or service of process is insufficient, "[t]he courts have broad discretion to dismiss the action or to retain the case but quash the service that has been made on defendant." Montalbano v. Easco Hand Tools, Inc. , 766 F.2d 737, 740 (2d Cir. 1985) (alteration in original) (citation omitted).

Federal Rule of Civil Procedure 4(e)(1) provides that service of process may be accomplished in accordance with "state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made." New York law provides a number of specific methods for serving individuals, and further provides that service may be effectuated "in such manner as the court, upon motion without notice, directs, if service is impracticable" under the other specified methods of service. N.Y. C.P.L.R. § 308(5) (McKinney 2010). The meaning of "impracticable" depends on the facts and circumstances of a particular case. Markoff v. South Nassau Community Hosp. , 458 N.Y.S.2d 672 (App. Div. 2d Dep't 1983). "In general, the plaintiff must make some showing that the other prescribed methods of service could not be made.'" Madu, Edozie & Madu, P.C. v. SocketWorks Ltd. Nigeria , 265 F.R.D. 106, 112 (S.D.N.Y. 2010) (quoting SEC v. Nnebe, No. 01 Civ. 5247(KMW)(KNF), 2003 WL 402377, at *3-4 (S.D.N.Y. Feb. 21, 2003)).

Defendants argue that approval of Plaintiff's alternative service of process via Rpost email was improperly obtained pursuant to N.Y. C.P.L.R. Section 308(5) because Plaintiff failed to adequately show that other prescribed methods of service were impracticable. The use of alternative service is improper where a plaintiff could have located a defendant's address with "minimal effort... thereby permitting service without difficulty." Hitchcock v. Pyramid Centers of Empire State Co. , 542 N.Y.S.2d 813, 814 (App. Div. 3d Dep't 1989). In his sworn affidavit in support of his dismissal motion, Cavazos demonstrates that his residential address could easily have been located via a basic, no-cost internet search at the time Plaintiff made its ex parte request to use alterative service of process.[6] Fleming, in his affidavit, states "I have made no attempt to conceal my whereabouts or present address, and my current address is easily and publically available to anyone who could conduct even the most basic search for me." (Fleming Aff. ¶ 10.) Plaintiff's representations regarding impracticality, in its original and supplemental applications, had been limited to conclusory assertions about difficulty and exemplars of letters written to local postmasters requesting residential addresses. In light of the demonstrated accessibility of information on the internet, Plaintiff's demonstration of impracticability was insufficient. Defendants' submission further makes clear that the service Plaintiff asked the Court to approve following the reinstatement of the case, ...


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