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Three Rivers Provider Network, Inc. v. Medical Cost Containment Professionals, LLC

United States District Court, D. Nevada

July 30, 2018

THREE RIVERS PROVIDER NETWORK, INC., Plaintiffs,
v.
MEDICAL COST CONTAINMENT PROFESSIONALS, LLC, et al, Defendants.

          ORDER

         Presently before the court is a motion to dismiss filed by defendants Medical Cost Containment Professionals, LLC (“Medical Cost”), Daniel Ayala (“Ayala”), Jarred Pierce (“Pierce”), and Frank Whelan (“Whelan”). (ECF No. 13). Plaintiff Three Rivers Provider Network, Inc. (“TRPN”) filed a response (ECF No. 19), to which defendants replied (ECF No. 21).

         Also before the court is defendants' motion to set aside clerk's entry of default (ECF No. 12), to which plaintiff responded (ECF No. 20). Defendants have not replied, and the time for doing so has since passed.

         I. Facts

         The instant action involves an alleged breach of contract and conspiracy by former employees of a medical billing company to form a similar organization that utilizes their previous employer's intellectual property and confidential information to grow its business.

         At the time of commencement of the suit, plaintiff was a proprietary provider network with its corporate headquarters in Henderson, Nevada.[1] (ECF No. 1 at 1). Plaintiff relies on its contracts with clients, client lists, and intellectual property to serve as the foundation of its business model. Id. at 6. The three individual defendants all held high-ranking positions at TRPN: Ayala was plaintiff's national account manager, Pierce was the vice president of managed care, and Whelan served as plaintiff's CFO. Id. The company provided the individual defendants access to its intellectual property and had them sign confidentiality agreements. Id. at 4-6.

         In its complaint, plaintiff claims that beginning sometime in late 2015, Ayala and Pierce, both of whom were plaintiff's employees at the time, violated their confidentially agreements and began to support a competing business, Medical Cost. Id. at 6-7. This business would negatively affect plaintiff by using plaintiff's business model and confidential information obtained from its contracts to steal away business, with the ultimate goal of replacing plaintiff in the marketplace. Id. at 7.

         The complaint establishes a rudimentary timeline of events related to the alleged conspiracy, commencing with the allegation that Pierce began to steal proprietary information in May of 2015. Id. In June of 2016, Ayala purportedly used his company email account to discuss the fiscal budget for the new company. Id. On April 8, 2016, Pierce signed a termination agreement with plaintiff. Id. In exchange for $50, 000 in severance pay, Pierce promised to maintain the strict confidentiality of all plaintiff's proprietary information that he obtained while employed with the company. Id. Ayala signed a similar agreement on August 3, 2016. Id.

         In July of 2017, while still employed by plaintiff, Ayala officially filed to register Medical Cost as an LLC in California. Id.

         Plaintiff filed suit in the United States District Court for the District of Nevada on January 24, 2018. Id. at. Plaintiff asserts four causes of action against all four defendants: (1) conversion; (2) usurpation of corporate opportunity; (3) violation of the Uniform Trade Secrets Act; (4) unjust enrichment; and (5) constructive trust. Id. at 19-23. Plaintiff asserts the following causes of action against the individual defendants only: (1) breach of contract; (2) implied covenant of good faith and fair dealing; (3) civil conspiracy; and (4) breach of fiduciary duty. Id. at 10-18. Additionally, plaintiff asserts breach of duty of loyalty against Whelan. Id. at 15-16.

         In the instant motion, defendants move to dismiss for lack of personal jurisdiction. (ECF No. 13).

         II. Legal Standard

         Federal Rule of Civil Procedure 12(b)(2) allows a defendant to move to dismiss for lack of personal jurisdiction. To avoid dismissal under Rule 12(b)(2), a plaintiff bears the burden of demonstrating that its allegations would establish a prima facie case for personal jurisdiction. See Boschetto v. Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008). Courts accept allegations in a plaintiff's claim as true and should construe factual disputes in the plaintiff's favor. Rio Props., Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1019 (9th Cir. 2002).

         Personal jurisdiction over a defendant is proper when the law provides for jurisdiction and the exercise of jurisdiction comports with notions of due process. Walden v. Fiore, 134 S.Ct. 1115, 1121 (2014). “Federal courts ordinarily follow state law in determining the bounds of their jurisdiction over persons.” Daimler AG v. Bauman, 571 U.S. 117, 125 (2014). Nevada has authorized its courts to exercise jurisdiction over persons “on any basis not inconsistent with . . . the Constitution of the United States.” Nev. Rev. Stat. § 14.065.

         Due process requires the defendant have at least “minimum contacts” with the forum state so that “maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). “[T]he defendant's conduct and connection with the forum State [must be] such that he should reasonably anticipate being haled into court there.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). “[I]t is the defendant, not the plaintiff or third parties, who must create contacts with the forum State.” Walden, 134 S.Ct. at 1126.

         In analyzing whether a defendant has a sufficient connection with the forum state, courts distinguish between general and specific jurisdiction. See Helicopteros Nacionales de Colombia S.A. v. Hall, 466 U.S. 408, 414 n.8-9 (1984). General jurisdiction is appropriate where a defendant's activities in the forum state are so “substantial” or “continuous and systematic” that the defendant is essentially at home in the forum state. Daimler, 571 U.S. at 127. “This is an exacting standard, as it should be, because a finding of general jurisdiction permits a defendant to be haled into court in the forum state to answer for any of its activities anywhere in the world.” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 801 (9th Cir. 2004).

         If a court does not possess general jurisdiction, it still may exercise specific jurisdiction if the defendant has sufficient minimum contacts with the forum state in relation to the cause of action. Specific jurisdiction allows a court to hear claims that arise out of a defendant's “purposefully directed” activities in the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985). The Ninth Circuit has established a three-prong test for determining specific jurisdiction:

(1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the ...

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