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Sterling Computers Corp. v. Fling

United States District Court, D. South Dakota, Southern Division

December 18, 2019




         Plaintiff, Sterling Computers Corp., filed this action for injunctive relief and damages caused by the alleged tortious conduct of defendants, Billie Jo Fling and Kelyn Technologies, L.L.C. Docket 1. Kelyn now moves to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2). Docket 18. For the following reasons, the court grants Kelyn's motion to dismiss.


         Sterling is a corporation incorporated in California with its principal place of business in North Sioux City, Union County, South Dakota. Docket 1 ¶ 1. It provides information technology services to the federal government, state and local governments, and other clients. Id. ¶ 9. Sterling holds “strategic relationships” with federal agencies and “over 1, 800 manufacturers of IT hardware, software, and solutions.” Id. ¶ 11. It uses Salesforce, a sales contact and pipeline database, to manage its client contact information, notes and information on bids it has submitted, and current bids. Id. ¶ 18. The information contained in the Salesforce database holds great economic value for Sterling. Id. ¶ 23. The names of clients and bid information, if obtained by competitors, could allow those competitors to engage in unfair competition by undercutting Sterling's bids. Id. ¶ 25. Finally, the information contains sensitive information about United States's military projects. Id. ¶ 26. Sterling's federal government customers entrust it to keep this information secure and confidential. Id. Sterling closely guards the proprietary information held in its Salesforce database and takes steps to protect it from disclosure. See Id. ¶¶ 27, 28, 30, 34.

         Billie Jo Fling, non-moving defendant, began working for Sterling in April of 2011 as an account manager. Id. ¶ 36. Fling received and signed a noncompetition and non-disclosure agreement with Sterling as part of her employment. Id. ¶¶ 38-39, 42-43, 44, 45. Sterling alleges that as a salesperson, Fling had access to Sterling's Salesforce database and the confidential information it contained. Id. ¶ 46. She worked closely with numerous federal government clients and thus had access to those clients' confidential information in the Salesforce database. Id. ¶ 47. On or around November 20, 2018, Fling quit her position with Sterling. Id. ¶ 50.

         In or around January of 2019, Fling began working at Kelyn. Id. ¶ 54. Kelyn is a limited liability company incorporated in Colorado with its principal place of business in Parker, Colorado, and is Sterling's competitor. Id. ¶¶ 3, 54. On or around May 22, 2019, Sterling learned that Fling was “rendering sales services for Sterling customers with whom she had actual contact while employed by Sterling[.]” Id. ¶ 55. Sterling alleges that Fling “is using Sterling's confidential information to improperly solicit Sterling customers with whom she had actual contact while employed with Sterling[.]” Id. ¶ 56. Sterling also alleges that “Kelyn was aware when it hired Fling that Fling's former employer was Sterling, and that she possessed valuable information regarding Sterling customers that could be used to Kelyn's benefit.” Id. ¶ 58. Kelyn referenced specific accounts Fling oversaw at Sterling on its website. Id. ¶¶ 58-59.

         On or around May 30, 2019, after it learned about Fling's alleged use of its confidential information, Sterling reminded Fling of her obligations under Sterling's employee handbook and non-compete agreement. Id. ¶ 60. It also informed Kelyn of “Fling's and Kelyn's obligations to not interfere with Fling's agreements with Sterling and to not improperly use Sterling's confidential information.” Id. ¶ 61. Kelyn responded on June 24, 2019. Id. ¶ 63. According to Sterling, Kelyn received, and continues to receive, “a benefit from Fling's improper solicitation and rendering sales services for Sterling customers with whom Fling had actual contact while employed at Sterling.” Id. ¶ 64.

         Sterling filed suit against Kelyn and Fling on August 6, 2019. Id.; see Docket 1. Sterling alleged several claims against Kelyn. Id. at ¶¶ 82-92, 93-102, 103-108, 109-116, 117-122, 123-127. It asserted that personal jurisdiction over Kelyn exists in South Dakota under Calder v. Jones, 465 U.S. 783 (1984), “because [Kelyn] engaged in intentional and tortious conduct expressly and/or uniquely aimed at Sterling, which is a South Dakota corporation.” Docket 1 ¶ 7.

         The court granted limited jurisdictional discovery regarding Kelyn's motion to dismiss. Docket 46. After completing discovery, Sterling filed supplemental jurisdictional facts detailing Kelyn's contacts with South Dakota that Sterling alleges render Kelyn subject to personal jurisdiction in the state. Docket 61. The supplemental facts state that on March 20, 2018, Kevin Cronin, Kelyn's Vice President of Sales, received Fling's resume and cover letter from Mike Kuhn, a former Sterling employee. Id. ¶ 1. Sterling alleges that the resume contained its confidential information, including revenue numbers and business opportunities attributable to Fling. Id. ¶ 4. The facts do not state where Kuhn was located when he sent Fling's resume to Kelyn. See Id. ¶¶ 1, 4.

         In June of 2018, Fling reached out to Cronin to ask whether Kelyn was hiring. Id. ¶ 2. Cronin informed her that Kelyn was not. Id. In October of 2018, Fling again contacted Cronin. Id. ¶ 3. Cronin informed her that Kelyn may have an open position in December. Id. Fling's last day of employment with Sterling was November 20, 2018. Docket 1 ¶ 50. Fling again contacted Cronin in December of 2108 to ask about the position. Docket 61 ¶ 5. Kelyn planned to have a position open in January of 2019, so it began interviewing and negotiating employment with Fling. Id. During negotiations, Fling forwarded to Cronin her email correspondence with Sterling about her covenant not to compete. Id. ¶ 6. Cronin passed the information along to others within Kelyn. Id. The jurisdictional facts do not allege that Fling resided in South Dakota during the negotiation process or that Kelyn reached out to her in South Dakota or elsewhere. See Id. ¶¶ 2-10.

         Sterling also alleges that Kelyn had “numerous” other contacts with entities in South Dakota. Id. ¶¶ 11-40. These other contacts include a business deal between Kelyn and a United States Geological Survey (USGS) data center located near Sioux Falls. Id. ¶¶ 11-26. As a part of the business relationship with the USGS data center, Kelyn sent around 180 emails to USGS employees in South Dakota and received around the same number between 2012 and 2019. Id. ¶¶ 20-21. Cronin also traveled to Sioux Falls in 2013 and presented a three-hour proposal. Id. ¶ 11. Kelyn received two direct orders from the USGS data center, totaling around $6, 200. Id. ¶¶ 15-16. Sterling does not allege that the present cause of action relates to Kelyn's relationship with the USGS data center.

         Kelyn's contacts with entities in South Dakota also include calls and emails its employees made to Sterling's employees in September of 2019. Id. ¶¶ 27-40. Sterling and Kelyn jointly explored business opportunities, and Cronin was introduced to a Sterling employee via email regarding a request for a price quotation on one of Kelyn's products. Id. ¶ 29. Kelyn prepared a quote for Sterling for the product. Id. ¶ 30. The quote had Fling's name on it. Id. Sterling does not allege that the proposed joint business venture between Sterling and Kelyn relates to the present cause of action.


         On review of a Rule 12(b)(2) motion to dismiss, facts are viewed in the light most favorable to the plaintiff. K-V Pharm. Co. v. J. Uriach & CIA, S.A., 648 F.3d 588, 592 (8th Cir. 2011) (citing Digi-Tel Holdings, Inc. v. Proteq Telecomms. (PTE), Ltd., 89 F.3d 519, 522 (8th Cir. 1996)). The court may consider pleadings, affidavits, and exhibits in support of or in opposition to the motion. Id. In order to defeat a Rule 12(b)(2) motion based solely on affidavits ...

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