Opinion
No. C99-10 MJM
June 8, 1999.
ORDER
Introduction
This diversity case involves claims for damages by the plaintiffs, Amana Co., L.P., and Goodman Manufacturing Company, L.P., ("Amana") against two defendants, Distinctive Appliances, Inc., d/b/a Dacor ("Dacor"), a manufacturer of kitchen appliances which allegedly competes with Amana, and Joseph Adamski ("Adamski"), a former Amana employee now working for Dacor. Amana alleges that by hiring Adamsky, Dacor tortiously interfered with Amana's employment contract with Adamsky, and that since hiring Adamsky, Dacor has obtained Amana's trade secrets in violation of Iowa's trade secret act for use in the design and manufacturing of Dacor's kitchen appliances. Amana alleges that Adamsky, since he began working for Dacor, has violated Iowa's trade secret act and wrongfully converted Amana's intellectual property by giving Amana's trade secrets to Dacor.
This matter comes before this court on motions to dismiss by both defendants for lack of personal jurisdiction. On a motion to dismiss for lack of personal jurisdiction, the court must determine whether the plaintiff has set forth a prima facie case of personal jurisdiction, viewing the facts in the light most favorable to the plaintiff. Vandelune v. 4B Elevator Components Unltd., 148 F.3d 943, 948 (8th Cir. 1998); Digi-Tel Holdings v. Proteq Telecommunications (PTE), Ltd., 89 F.3d 519, 522 (8th Cir. 1996); Radaszewski by Radaszewski v. Telecom Corp., 981 F.2d 305, 309-10 (8th Cir. 1992) (where, as here, the parties submit affidavits and other evidence outside of the pleadings in support of their positions, the district court should apply the standards of Fed.R.Civ.P. 56), cert. denied, 508 U.S. 908 (1993).
Adamski and Dacor have also moved, in the alternative, to transfer the case to California under 28 U.S.C. § 1404(a) and 1406(a). In addition, Adamski moves to dismiss or for a stay under the Federal Arbitration Act because of a pending arbitration in Texas. Adamski also moves to dismiss the claim of "wrongful conversion" for failure to state a claim under Fed.R.Civ.P. 12(b)(6). This court will address the personal jurisdiction questions first and, if the court finds that it has jurisdiction, it will address the alternative motions to dismiss, transfer, or stay the proceedings.
Factual Background
Viewing the record in the light most favorable to Amana, it shows the following facts. From 1994 to 1998, Adamski was Amana's senior staff technologist working in Iowa. (Compl. ¶ 6; Kessler Aff. ¶ 5). In that position, Adamski learned many of Amana's trade secrets. (Compl. ¶ 34; Kessler Aff. ¶ 5). In mid-October 1998, Adamski resigned with the intent to begin working for Dacor, a California-based company. (Compl. ¶ 11; Kessler Aff. ¶ 10).
Kessler's affidavit was prepared October 21, 1998, and submitted to Iowa state court in Amana Co., L.P., v. Adamski, No. LACV 33903.
Amana alleges that Dacor competes with Amana in the sale of various kitchen appliances. (Compl. ¶ 10; Kessler Aff. ¶¶ 11-12)). Although there is evidence that Dacor's appliances are higher priced and perhaps of higher quality than Amana's, (Wick Aff. ¶¶ 6-7), the record shows that some of Amana's and Dacor's products perform the same services, are sold by the same retailers, and are priced within the same range. (Findings of Fact, Conclusions of Law, and Ruling, Amana Co., L.P., v. Adamski, No. LACV 33903, at 6 (Iowa Dist. Ct. Nov. 13, 1998)). Thus, for purposes of ruling on the motion to dismiss, this court finds that Amana and Dacor are competitors.
Wick's affidavit was prepared October 28, 1998, and submitted to Iowa state court in Amana Co., L.P., v. Adamski, No. LACV 33903.
On October 22, 1998, Amana sued Adamski in Iowa state court on the basis of a non-compete agreement, seeking to enjoin Adamski from working for Dacor (or any other competitor) or from revealing any trade secrets to Dacor (or anyone else). (Compl. ¶ 12). Although Dacor was not a defendant in the state court litigation, Dacor's vice president for sales, Andrew Wick, submitted an affidavit, dated October 28, 1998, opposing a temporary injunction against Adamski. (Wick Aff. ¶ 8).
At oral argument, counsel for Amana explained that if it had wanted to sue Adamski in federal court at that time, it could not have done so because of the lack of diversity or other subject matter jurisdiction. Since Amana commenced the state court lawsuit, however, Adamski has moved to California, creating diversity of citizenship as a basis of jurisdiction in this court.
In a series of orders, dated October 30, 1998, November 13, 1998, and November 18, 1998, the Iowa state court enjoined Adamski from, inter alia, commencing employment with Dacor or disclosing any trade secrets to Dacor. (Compl. ¶ 13). The state court found that as of November 13, 1998, Adamski had been offered and had accepted employment with Dacor for 60% more compensation than he received at Amana. (Findings of Fact, Conclusions of Law, and Ruling, Amana Co., L.P., v. Adamski, No. LACV 33903, at 4 (Iowa Dist. Ct. Nov. 13, 1998)). Adamski acknowledges that he moved to California in early November, 1998. (Adamski Aff. ¶ 2). Amana alleges that Adamski began working for Dacor by that time either directly or indirectly through a third party who assigned Adamski to work on projects for Dacor. (Compl. ¶ 14).
Adamski's affidavit was prepared February 2, 1999, for use in this case.
On December 3, 1998, Adamski vacated his residence in Iowa. (Adamski Aff. ¶ 3). On December 9, 1998, Dacor loaned Adamski $150,000 and recorded a mortgage on Adamski's former residence in Iowa. (Plf. Resist. to Dacor's Mot. to Dismiss or Transfer, Doc. No. 12, Ex. G). Although the record does not explain why Dacor loaned money to Adamski or recorded the mortgage on his Iowa property, the timing of the mortgage reasonably suggests, viewing the record in the light most favorable to Amana, that the loan and mortgage were part of the negotiations or the compensation package related to Dacor's employment of Adamski.
On December 18, 1998, Amana obtained an order to show cause why Adamski and Dacor should not be held in contempt. (Compl. ¶ 15). The record before this court does not contain the state court's order to show cause nor the affidavit or application on which the order was based.
On January 5, 1999, Adamski commenced suit against Amana in state court in California seeking a declaration that the covenant not to compete and the Iowa state court's temporary restraining order violated California public policy and were unenforceable in California. Adamski's lawsuit was later removed to the United States District Court for the Central District of California. Amana apparently received notice of Adamski's lawsuit on January 11, 1999.
In its complaint in this case, filed January 13, 1999, Amana alleges that Dacor knew about the non-compete provisions of the employment contract, knew about Amana's lawsuit against Adamski in Iowa state court, and knew about Amana's request for an injunction — all before Adamski began working for Dacor — yet Dacor hired Adamski. (Compl. ¶¶ 18, 20). In fact, Amana alleges that Dacor knew about the state court's injunction before hiring Adamski and continued to employ Adamski despite the injunction. (Compl. ¶¶ 21-22).
For its causes of actions in this case, Amana alleges that by employing Adamski, Dacor "intentionally and improperly interfered" with the contracts between Adamski and Amana and "misappropriated Amana's trade secret information." (Compl. ¶¶ 23, 29). Similarly, Amana alleges that Adamski "misappropriated Amana's trade secret information" and exercised "wrongful control" over Amana's intellectual property. (Compl. ¶¶ 34, 40-41).
Dacor opposed the contempt proceedings in state court on the basis that the Iowa state court lacked personal jurisdiction over Dacor. On January 28, 1999, after the complaint in this matter was filed, the Iowa District Court, the Honorable David Remley, presiding, ruled that it did not have personal jurisdiction over Dacor in the contempt proceeding. (Ruling, Amana Co., L.P., v. Adamski, No. LACV 33903, at 3-4 (Iowa Dist. Ct. Jan. 28, 1999) (reproduced as Dacor Mot. to Dismiss, Ex. E)). The state court reasoned that it did not have general personal jurisdiction over Dacor because Dacor did not have any employees in Iowa, Dacor's representatives made only "occasional visits" to Iowa for repairs or sales, and Dacor made only 0.4% of its sales in Iowa. ( Id. at 3). The court further reasoned it did not have specific personal jurisdiction because the contempt proceeding did not arise out of Dacor's contacts with Iowa. ( Id. at 4). Amana's appeal of the state court's ruling on jurisdiction in the contempt proceeding is pending before the Iowa Supreme Court.
Personal Jurisdiction A. Collateral Estoppel.
Dacor argues first that the state court's ruling in the contempt proceeding that it did not have personal jurisdiction over Dacor collaterally estops Amana from seeking to establish personal jurisdiction in this case. "[F]ederal courts must give preclusive effect to state court judgments, and the scope of the preclusive effect is governed by the law of the state from which the prior judgment emerged." Simmons v. O'Brien, 77 F.3d 1093, 1095 (8th Cir. 1996). "According to the Iowa Supreme Court, `[i]ssue preclusion, also called collateral estoppel, prevents relitigation of already litigated factual issues which were essential to an earlier judgment on a different cause of action binding the same parties.'" Teleconnect Co. v. Ensrud, 55 F.3d 357, 361 (8th Cir. 1995) (quoting Iowa Elec. Power Light Co. v. Lagle, 430 N.W.2d 393, 397 (Iowa 1988)). "Under Iowa law collateral estoppel, or issue preclusion, applies only where four requirements are met: (1) the issue concluded must be identical, (2) the issue must have been raised and litigated in the prior action, (3) the issue must have been material and relevant to the disposition of the prior action, and (4) the determination made of the issue in the prior action must have been necessary and essential to the resulting judgment." Smith v. Updegraff, 744 F.2d 1354, 1362 (8th Cir. 1984) (citing Mauer v. Rohde, 257 N.W.2d 489, 497 (Iowa 1977)).
In this case, it is clear that the issue of personal jurisdiction over Dacor was raised and litigated in the state court contempt proceeding, that the issue was dispositive in favor of Dacor, and that the issue was essential to the order dismissing Dacor from the contempt proceeding. Moreover, the fact that the state court decision is pending on appeal does not defeat the preclusive effect of the state court judgment. See Johnson v. Ward, 265 N.W.2d 746, 749 (Iowa 1978); Watson v. Richardson, 110 Iowa 698, 80 N.W. 416 (1899); 18 Moore's Federal Practice § 131.30[2][c][ii], at 131-97 to 131-98 (Matthew Bender 3d ed.).
The disputed question is whether the issue before the Iowa state court (i.e., personal jurisdiction in the contempt proceeding) was identical to the issue now before this court (i.e., personal jurisdiction on Amana's tortious interference with contract and trade secret claims). Certainly, both issues involve the personal jurisdiction of Iowa courts over Dacor, and the Iowa Supreme Court has held that the doctrine of collateral estoppel applies to personal jurisdictional issues. Bascom v. Jos. Schlitz Brewing Co., 395 N.W.2d 879, 882 (Iowa 1986). Because the issue of personal jurisdiction has arisen in different contexts, however, Dacor's claim of collateral estoppel requires more careful analysis.
In Bascom, the plaintiff originally sued two out-of-state beer corporations for injuries sustained in Tennessee when an empty keg of beer fell from the truck he was driving onto his leg. The district court in the first suit sustained the defendant's special appearance on the basis of lack of personal jurisdiction. Rather than appeal, the plaintiff filed a second suit on the same cause of action, adding factual allegations that the defendants were nationwide beer manufacturers who have numerous contacts with Iowa through distribution and advertisement of their products and that the beer keg which fell onto the plaintiff's leg was loaded in Marshalltown, Iowa. Id. at 880-81. The Iowa Supreme Court held the personal jurisdiction issues in each suit were identical because the plaintiff could have alleged the additional evidentiary facts in the first suit and, in fact, those facts were effectively before the court. Id. at 883-84. The court reasoned, "The additional allegations did not change the ultimate fact issue of sufficient minimum contacts." Id. at 883.
As in Bascom, 395 N.W.2d at 883-84, Amana has asserted additional facts in this case to try to prove personal jurisdiction that was found not to exist in the state court contempt proceeding. Amana has not offered any explanation why the additional facts it has alleged in this case were not available in the state court contempt proceeding. Id. at 884; see also 18 Moore's Federal Practice, § 132.02[2][e], at 132-28 ("A party may not assert a change in controlling facts when the facts allegedly showing a change in circumstances could have been discovered in the exercise of due diligence."). Thus, the court concludes that additional facts do not defeat the application of collateral estoppel here.
Unlike Bascom, however, the causes of action in Amana's current lawsuit and the state court contempt proceeding differ. Causes of action are relevant to personal jurisdiction under the doctrine of "specific jurisdiction." Under this doctrine, the plaintiff needs to show only that "`the defendant has purposely directed its activities at forum residents, and the litigation results from injuries arising out of, or relating to, those activities.'" Guinness Import Co. v. Mark VII Distributors, Inc., 153 F.3d 607, 614 (8th Cir. 1998) (quoting Burlington Indus., Inc. v. Maples Indus., 97 F.3d 1100, 1102 (8th Cir. 1996)); Dean v. Olibas, 129 F.3d 1001, 1004 (8th Cir. 1997) (same); see also Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472-73 (1985). In this case, Amana contends that Dacor tortiously interfered with its contractual relations and that Dacor misappropriated its trade secrets. By contrast, in the state court contempt proceeding, Amana was required to show, beyond a reasonable doubt, that Dacor, as a non-party, willfully aided and abetted Adamski in violating the terms of the state court's temporary injunction. See Henley v. Iowa District Court, 533 N.W.2d 199, 202-03 (Iowa 1995) (discussing contempt). Because the causes of action differ, the personal jurisdictional issues are not identical.
Amana argues that because its cause of action is an intentional tort aimed at harming an Iowa company, there is jurisdiction. See Calder v. Jones, 465 U.S. 783 (1984). This argument, discussed more fully below, highlights the importance of the cause of action in determining personal jurisdiction.
A careful reading of the state court's order finding no personal jurisdiction further shows that the personal jurisdiction issues are not identical. First, the state court reasoned that "the submission of an affidavit prior to the Court's issuance of a temporary injunction is not sufficient to bring Dacor under the specific jurisdiction of this court." (Dacor Mot. to Dismiss, Ex. E at 4 (emphasis added)). In this case, the affidavit could be relevant to the tortious interference with contract and misappropriation claims because Dacor's conduct throughout its negotiations with Adamski and its employment of Adamski are at issue.
Second, the state court reasoned that the contempt proceeding did not arise out of the recording of the mortgage in Iowa on Adamski's residential property because:
Plaintiffs' real complaint with Dacor is that it employed [Adamski].
. . . Plaintiffs initiated the contempt proceeding against Dacor before Plaintiffs were aware of the mortgage. The loan by Dacor and mortgage transaction is only indirectly related to the contempt proceedings.
(Dacor Mot. to Dismiss, Ex. E at 4). In this case, by contrast, the loan and the mortgage recorded to secure the loan could be relevant to the causes of action if the loan was made as part of Dacor's efforts to interfere with the contract between Adamski and Amana or to obtain trade secrets from Adamski. For these reasons, the court concludes that collateral estoppel does not bar Amana from asserting personal jurisdiction over Dacor.
This conclusion does not mean that the court disagrees with Judge Remley's analysis of the personal jurisdiction issue in the contempt proceeding. Rather, the court concludes that the difference in causes of actions prevents the application of the collateral estoppel doctrine in this case. The court expresses no opinion as to whether Judge Remley's analysis was correct or not.
B. Dacor.
Because Amana is not collaterally estopped from asserting personal jurisdiction over Dacor, this court must independently review the contacts between Dacor and Iowa to determine whether Amana has made a prima facie case of personal jurisdiction on its causes of action in this case. In deciding whether this court has personal jurisdiction over the defendants the court must address (1) whether Iowa would allow a state court to exercise jurisdiction over them and (2) whether the exercise of jurisdiction would violate the Due Process Clause of the Fourteenth Amendment. Guinness Import, 153 F.3d at 613.Dacor first argues that Iowa's long-arm statute, Iowa Code § 617.3, does not extend to the full reach of the constitutional due process analysis, and that no tort took place in Iowa as required for service of process under Iowa Code § 617.3. However, Dacor overlooks the fact that service of process may also be made under Iowa R. Civ. P. 56, which provides that service may be made on any corporation "as provided in R.C.P. 56.1 within or without the state . . . in every case not contrary to the provisions of the Constitution of the United States." Iowa R. Civ. P. 56.2(a). Clearly, under Rule 56.2, Iowa allows personal jurisdiction to the fullest extent allowed by the federal Constitution. See Bell v. Fischer, 887 F. Supp. 1269, 1277 (N.D. Iowa 1995) (Bennett, J.) (citing Larsen v. Scholl, 296 N.W.2d 785, 788 (1980)); Life v. Best Refrigerated Exp., Inc., 443 N.W.2d 334, 335-36 (Iowa Ct.App. 1989).
Under Rule 56.1, service on a corporation may be accomplished "by serving any present or acting or last known officer thereof, or any general or managing agent, or any agent or person now authorized by appointment or by law to receive service of original notice[.]" Iowa R. Civ. P. 56.1(f); see Life, 443 N.W.2d at 336-37 (discussing Iowa R. Civ. P. 56.1(f)). Amana personally served "Chris Fesmire, authorized representative, on behalf of Distinctive Appliances, Inc., d/b/a Dacor." (Plf. Ex. A). Because Dacor does not argue that Fesmire was not its "authorized representative," the court will not grant Dacor's motion to dismiss for inadequate service of process under Fed.R.Civ.P. 12(b)(5).
Dacor next argues that it does not have sufficient minimum contacts with Iowa to sustain personal jurisdiction under the Due Process Clause. Due process prohibits the exercise of jurisdiction over a nonresident defendant unless the defendant has "`minimum contacts' with the forum state such that the maintenance of a suit against that defendant does not offend `traditional notions of fair play and substantial justice.'" Guinness Import, 153 F.3d at 613-14 (quoting International Shoe v. Washington, 326 U.S. 310, 316 (1945)) (internal quotations omitted). "Minimum contacts" requires "`some act by which the defendant purposely avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.'" Burger King, 471 U.S. at 475 (quoting Hanson v. Deckla, 357 U.S. 235, 253 (1958)). Minimum contacts exist when a defendant's contacts with the forum "are such that he should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
The Eighth Circuit has employed a five-factor test to decide whether a defendant is subject to personal jurisdiction in a forum. As discussed above, one factor in the jurisdictional analysis is the relationship between the contacts with the forum state and the cause of action. The other factors include: (1) the nature and quality of the defendant's contacts with the forum state; (2) quantity of contacts; (3) the interests of the forum state; and (4) the convenience of the parties. Guinness Import, 153 F.3d at 614. Of these factors, the last two "reasonableness" factors — the interests of the forum state and convenience of the parties — are of secondary importance. Digi-Tel Holdings, 89 F.3d at 523.
As noted above, see note 5, Amana argues that because it brought an intentional tort claim against Dacor for conduct allegedly aimed at Iowa, personal jurisdiction exists under Calder v. Jones, 465 U.S. 783 (1984). In Calder, the Supreme Court upheld the exercise of personal jurisdiction in California over out-of-state defendants who published allegedly defamatory statements about a California resident in a publication which was widely distributed in California.
In Dakota Industries v. Dakota Sportswear, 946 F.2d 1384 (8th Cir. 1991), the Eighth Circuit extended Calder to intentional trademark infringement where the out-of-state defendant distributed goods in South Dakota bearing a label that infringed the South Dakota plaintiff's trademark. The court reasoned:
The fact that some of the `passing off' occurred in South Dakota, along with the fact that [the plaintiff's] principal place of business is in South Dakota, demonstrates that [the defendant's] actions were uniquely aimed at the forum state and that the `brunt' of the injury would be felt there, as required by Calder.Id. at 1391. See also Finley v. River North Records, Inc., 148 F.3d 913, 916-17 (8th Cir. 1998) (intentional misrepresentations to an Arkansas resident plus the delivery of promotional materials into Arkansas were sufficient to confer personal jurisdiction in Arkansas over the out-of-state defendant).
By contrast, in Hicklin Engineering, Inc. v. Aidco, Inc., 959 F.2d 738, 739 (8th Cir. 1992) (per curiam), the court held that an out-of-state intentional tort aimed at an in-state plaintiff, "absent additional contacts," was insufficient to establish personal jurisdiction within the state. Therefore, in applying Calder, the Eighth Circuit has been clear that plaintiffs must have intended to harm an in-forum company and had some additional contact with the forum (such as the publication of the defamatory statements in California in Calder, the distribution of women's sportswear in South Dakota in Dakota Industries, or the delivery of promotional materials to Arkansas in Finley).
In this case, Amana has alleged not only that Dacor committed an intentional tort aimed at Amana in Iowa, but also that Dacor had additional contacts with Iowa by (1) communicating with Adamski in Iowa to negotiate his employment, (2) submitting an affidavit to an Iowa court to support Adamski's position in litigation with Amana, and (3) recording a mortgage on Adamski's property in Iowa. In addition, it is undisputed that Dacor sells products to retailers in Iowa, advertises specific Iowa dealerships and service providers on the internet, and communicates with Iowa retailers by telephone and by occasional visits by sales and repair personnel. (Lin Aff. ¶ 12; Plf. Ex. C, E). Obviously, Dacor must be equipped to defend itself in Iowa when it sells products, authorizes service providers, and recruits new employees in the state, especially when recruiting new employees in Iowa is part of an intentional tort aimed at an Iowa-based company. Therefore, the court concludes that these "additional contacts" — together with the alleged intentional tort — constitute a prima facie case of personal jurisdiction.
Giving Amana the benefit of all reasonable inferences, as this court must at this stage of the proceedings, the record shows that Dacor communicated with Adamski in Iowa before Adamski began employment with Dacor. Adamski states that he moved to California in "early November." Before moving to California, Adamski resigned from Amana with the stated intention of working for Dacor. Presumably, Adamski and Dacor communicated with each other before Adamski announced he was resigning from Amana to take a position with Dacor.
Also, the affidavit which Dacor submitted to the Iowa state court on October 28, 1998, stated that "Dacor has no intention of asking Mr. Adamski to violate his confidentiality agreement with Amana. Dacor requires its employees to sign a confidentiality agreement, and recognizes that it would be unethical to seek to obtain proprietary Amana information from Adamski." (Wick Aff. ¶ 8). This affidavit suggests that as of October 28, 1998, Dacor had at least negotiated with Adamski while Adamski was still a resident of Iowa and that Dacor was aware that Amana had a confidentiality agreement with Amana.
Therefore, the court finds that, at this stage of the proceedings, there is evidence from which it could reasonably be inferred that Dacor and Adamski communicated with each other while Adamski was in Iowa.
This court's conclusion is supported by EFCO Corp. v. Aluma Systems, USA, Inc., 983 F. Supp. 816 (S.D. Iowa 1997), in which the court ruled that, where an intentional tort was allegedly aimed at an in-state company, no additional physical contacts between the defendant and the forum were needed to sustain personal jurisdiction over an out-of-state defendant. Id. at 822-23. In this case, there is evidence that Dacor communicated with Adamski in Iowa to hire an Iowan, submitted an affidavit to an Iowa court, and recorded a mortgage in Iowa. Under EFCO, these contacts are sufficient to confer personal jurisdiction in Iowa over the intentional tort claim.
This court's conclusion is also supported by the reasoning in May Department Stores v. Wilansky, 900 F. Supp. 1154 (E.D. Mo. 1995), which factually resembles Amana's claims against Dacor and Adamski. In May, the Missouri-based plaintiff (May) sued a former executive officer (Wilansky) for breach of contract and sued a competitor (Bon-Ton) which hired Wilansky for tortious interference with contract. The court held that personal jurisdiction over Bon-Ton did not exist because (1) Bon-Ton did not transact any business in Missouri and (2) "Nothing in the record indicates that Bon-Ton utilized any form of communication with any person in Missouri in connection with its negotiations with Wilansky [who did not live or work in Missouri] which allegedly led to his breach of contract with May." Id. at 1161. In this case, by contrast, there is evidence (as discussed above) which suggests that Dacor communicated with Adamski in Iowa about breaching his contract with Amana and had other contacts with Iowa which subjects it to personal jurisdiction in Iowa.
C. Adamski.
Adamski argues he is now a California resident who is not subject to jurisdiction in Iowa. The court rejects this argument. The fact that Adamski was an Iowa resident for nearly five years until early November 1998 makes this issue easy to resolve. In May Department Stores, 900 F. Supp. at 1162-63, the Eastern District of Missouri exercised personal jurisdiction over Wilansky, the former executive of the plaintiff's, even though Wilansky had never resided in Missouri and worked primarily in other states. Similarly, in United States Surgical Corp. v. Imagyn Medical Technologies, Inc., 25 F. Supp.2d 40, 44-45 (D. Conn. 1998), in which the employer sued a former employee for breach of contract, the District of Connecticut exercised personal jurisdiction over a former employee who worked for the Connecticut company even though the employee resided and worked primarily in California. In this case, Adamski not only had an extensive business relationship with Amana, but he also resided in and worked primarily in Iowa. Clearly, Iowa courts may exercise personal jurisdiction over Adamski for claims arising out of his employment relationship with Amana.
Motion to Transfer
Having found that this court has personal jurisdiction over the defendants, the court must now address their motions to transfer to the United States District Court for the Central District of California. Where a federal court has jurisdiction, a motion to transfer is governed by 28 U.S.C. § 1404(a). Section 1404(a) provides: "For the convenience of the parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." Although the statute specifies "the convenience of the parties and witnesses" and "the interest of justice" as factors, the Eighth Circuit has held that deciding a transfer motion "require[s] a case-by-case evaluation of the particular circumstances at hand and a consideration of all relevant factors." Terra Int'l, Inc. v. Mississippi Chem. Corp., 119 F.3d 688, 691 (8th Cir.) (emphasis added), cert. denied, 118 S. Ct. 629 (1997). "In general, federal courts give considerable deference to a plaintiff's choice of forum and thus the party seeking a transfer . . . typically bears the burden of proving that a transfer is warranted." Id. at 695.
Dacor and Adamski argue that the convenience of the parties and the witnesses favor litigating this matter in California. The court disagrees. Although litigating in California would be more convenient for Adamski and Dacor, it would be equally inconvenient for Amana to litigate in California. See Terra Int'l, 119 F.3d at 696-97 ("Merely shifting the inconvenience from one side to the other . . . is not a permissible justification for a change in venue.") (quoting Scheidt v. Klein, 956 F.2d 963, 966 (10th Cir. 1992)). Relevant documents, such as Amana's trade secret information, are in Iowa, while others are in California.
Furthermore, the interests of justice favor litigating this case in Iowa. Amana alleges that Dacor's tortious conduct was directed at Iowa and that the misappropriation of trade secrets by the defendants violated Iowa law. Although Adamski and Dacor argue that either Texas or California law applies, the application of substantive law is something which this court can readily resolve by the application of the appropriate choice of law rules. Iowa courts have an interest in adjudicating claims of tortious conduct directed at Iowa.
Adamski also argues that he was the "first to file" when he filed suit in California, and that his contract with Amana contained a forum selection clause designating Texas as the appropriate forum. Neither of these arguments persuades the court that a transfer is appropriate in this case. As to the forum selection clause, the court questions how the selection of Texas as the appropriate forum would favor transfer to California. Even assuming that such a forum selection clause would favor a transfer, the clause cited by Adamski is not a forum selection clause governing this lawsuit. Section 7 of the "Procedures for Arbitration under the Goodman Manufacturing Company, L.P., 1998 Annual Divisional Incentive Plan" provides that the parties consent to jurisdiction in Texas, but recognizes that "judgment upon any award rendered in arbitration may be entered by any court having jurisdiction." (Adamski Ex. C). The parties' consent to litigation in Texas to enforce an arbitration award is not the same as a forum selection clause which requires all litigation to be filed in Texas.
Similarly, the "first-filed rule" does not require a transfer in this case. "[T]he first-filed rule gives priority, for purposes of choosing among possible venues when parallel litigation has been instituted in separate courts, to the party who first establishes jurisdiction." Northwest Airlines, Inc. v. American Airlines, Inc., 989 F.2d 1002, 1006 (8th Cir. 1993) (citing United States Fire Ins. Co. v. Goodyear Tire Rubber Co., 920 F.2d 487, 488 (8th Cir. 1990)). "The rule, however, yields to the interests of justice, and will not be applied where a court finds `compelling circumstances' supporting its abrogation." Id. Two "red flags" which suggest that a first-filed lawsuit should not be given priority are when the first-filed lawsuit was brought simply to beat the other party to the courthouse or when the first-filed lawsuit seeks only declaratory relief from the threat of litigation while the defendant has a legitimate claim for damages, injunctive relief, or some other concrete injury. Id. at 1007.
In this case, the court concludes that Adamsky's lawsuit is not properly characterized as the first-filed lawsuit. In the court's view, the first-filed lawsuit between Adamsky and Amana was Amana's lawsuit filed in October, 1998, in Iowa state court. By seeking a declaration that the Iowa state court's temporary restraining order was not enforceable in California, Adamsky's "first-filed" lawsuit in California was really a collateral attack on the results of Amana's lawsuit in Iowa state court. Moreover, the causes of action in Adamsky's lawsuit do not cover the same subject matter as Amana's lawsuit against Adamsky in this court. Adamsky's lawsuit in California — like Amana's lawsuit in Iowa state court — deals primarily with the question of Adamsky's covenant not to compete. By contrast, the subject matter of Amana's claims against Adamsky in the lawsuit filed in this court is trade secrets and intellectual property.
Even if Adamsky's lawsuit could properly be characterized as the first-filed, both red flags identified by the Eighth Circuit in Northwest Airlines are implicated by Adamsky's lawsuit. First, Adamsky brought his lawsuit with full awareness that Amana was pursuing its remedies in Iowa. Second, Adamsky had not suffered any injury other than the Iowa state court's order and the threat of additional litigation by Amana. Adamsky's only claim for relief was for a declaratory judgment, but "declaratory judgments are not to be used defensively to deny a prospective plaintiff's choice of forum." See Prudential Ins. Co. of America v. Doe, 140 F.3d 785, 790 (8th Cir. 1998). Under these circumstances, the court finds that the "first-filed" rule does not apply and that Adamsky's motion to transfer should be denied.
Motion to Dismiss or Stay Pending Arbitration
Finally, the court must address Adamski's motion to dismiss in light of the pending arbitration in Texas. Amana initiated the arbitration proceeding by filing a demand for arbitration before the American Arbitration Association (AAA) under the Commercial Arbitration Rules on December 7, 1988. (Adamski Ex. B). The demand for arbitration identified the nature of the dispute as "Enforceability of covenant not to compete, not to disclose trade secrets" and identified the relief sought as "Injunctive relief enforcing covenant not to compete, not to disclose trade secrets." ( Id.). The demand for arbitration further provided, "The named claimant [i.e., Amana] [is] a party to an arbitration agreement contained in a written contract . . . and providing for arbitration under the Commercial Arbitration Rules of the American Arbitration Association." ( Id.).
Amana now argues that it "never agreed to arbitrate claims it might have concerning misappropriation of trade secrets." (Amana Opp. to Def. Adamski's Mot. to Dismiss or Transfer at 9). The court finds, however, that this argument is squarely contradicted by the demand for arbitration it filed with the AAA. Furthermore, Section 10 of the "Agreement Granting Incentive Units under the Goodman Manufacturing Company, L.P., 1998 Annual Divisional Incentive Plan," which contains the non-compete and trade secret provisions, provides:
Participant acknowledges that money damages would not constitute a sufficient remedy for any breach of this Section 10 by Participant, and the Company shall be entitled to enforce the provisions of this Section 10 by terminating any payments then owing to Participant under this Agreement and to specific performance and injunctive relief as remedies for such breach or any threatened breach. Specifically, and notwithstanding contrary provisions of Section 11 of this Agreement, the Company may seek and obtain preliminary injunctive relief in any court of competent jurisdiction to forestall irreparable harm from a violation of this Section 10, provided that, once such relief is obtained, adjudication of the merits of any dispute under this Section 10 shall be governed by the parties' agreement to arbitrate disputes hereunder pursuant to Section 11. (Plf. Ex. H at 3) (emphasis added). Section 10 prohibits Adamski from working for competitors under certain circumstances and from divulging trade secrets. Only Adamski could violate Section 10 of the Agreement; only Amana could initiate claims under Section 10. If Section 11 does not apply to any claims initiated by Amana, as Amana argues, that would render the italicized portion of Section 10 a nullity. In the court's view, Section 10 commits the parties to arbitrate any disputes over trade secrets or the covenant not to compete, without regard for which party initiates the claim before the arbitrator.
Because Amana submitted the trade secret and covenant not to compete to arbitration, and because it appears to the court that the agreement requires arbitration of these issues, the court will not allow Amana to press its claims in this court while the arbitration is pending. Although Adamski argues that dismissal is most appropriate, he also concedes that "if the Court wishes to, it can certainly stay the action, rather than dismiss." (Adamski Reply Mem. at 9). Therefore, the court will stay its proceedings. See 9 U.S.C. § 3 (providing for a "stay" upon application of a party "upon any issue referable to arbitration under an agreement in writing for such arbitration").
ORDER
For the foregoing reasons, the defendants' motions to dismiss and motions to transfer to the United States District Court for the Central District of California are DENIED. The plaintiffs' claims against the defendant Adamsky are STAYED pending arbitration between the plaintiffs and Adamsky.