Massachusetts Federal Court Takes Jurisdiction Over “One-Man” Georgia Corporation Whose Agent Allegedly Stole Trade Secrets in Massachusetts

            In a decision from March that has only recently garnered media attention, Judge Rya Zobel of the U.S. District Court in Massachusetts concluded that a Georgia corporation whose agent allegedly stole trade-secret information from a company’s office in Waltham, Massachusetts could face a lawsuit in Massachusetts.  The plaintiff, BGI Inc., is a Massachusetts corporation that makes environmental monitoring equipment such as air samplers and airflow meters.  Its former president, Thomas Merrifield, started a company called Merrifield & Associates (“M&A”), which is based in Georgia.  In fact, M&A is a Georgia corporation, its principal place of business is in Georgia, and it conducts no business, gets no revenue, owns no property, and has never brought a lawsuit in Massachusetts.  But M&A’s only employee, Merrifield, allegedly stole trade-secret information from BGI’s office in Waltham for M&A.  Based on the evidence, that was enough for Judge Zobel to say that her court in Massachusetts had “personal jurisdiction” over M&A as a defendant in the lawsuit, and she denied M&A’s motion to dismiss the case against it for lack of jurisdiction.

            Her reasoning was based on “specific jursidiction,” which requires that (1) the defendant have “minimum contacts” with the forum state (here, Massachusetts); (2) the claim be related to those contacts; (3) the defendant’s contacts represent a “purposeful availment” of the privilege of conducting business in the forum state; and (4) jurisdiction is reasonable under the circumstances.  In applying these elements, Judge Zobel accepted BGI’s evidence as true under the “prima facie standard.”  She determined that BGI satisfied elements (1) and (2) by showing that M&A stole BGI’s trade secrets in Massachusetts, which, of course, was related to BGI’s claim.  And because M&A could have foreseen that it would be sued in Massachusetts and its acts were voluntary, it “purposefully availed” itself of the privilege of doing business in Massachusetts to satisfy element (3).  Finally, after applying several factors, Judge Zobel decided that jursidiction over M&A would be reasonable because Merrifield (M&A’s only employee) was already a defendant in the lawsuit, jurisdiction would eliminate the need for a second lawsuit, and Massachusetts and other states have an interest in preventing corporate espionage.     

            Above all, this decision shows that out-of-state corporations are not safe from lawsuits in Massachusetts if they act inappropriately in Massachusetts.  What is more, out-of-state litigation can add additional expense to an already costly litigation process, which is never good for corporations that are watching the bottom line.

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