Dan Dee Int'l, LLC v. Glob. New Ventures Grp. LC

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DAN DEE INTERNATIONAL, LLC, DANDEE HONG KONG HOLDINGS LIMITED, and DAN DEE INTERNATIONAL HOLDINGS, INC., Plaintiffs, v. GLOBAL NEW VENTURES GROUP LC, LEE CAPOZZI, and PATRICK LEE, Defendants.

Civil Action No. 23-1274-GBW

United States District Court, D. Delaware

June 18, 2024

MEMORANDUM ORDER

GREGORY B. WILLIAMS UNITED STATES DISTRICT JUDGE

Pending before the Court is Defendant Global New Ventures Group LC's (“GNV” or “Defendant”) Motion to Dismiss Plaintiffs Dan Dee International, LLC DanDee Hong Kong Holdings Limited, and Dan Dee International Holdings, Inc.'s (collectively, “Plaintiffs” or “Dan Dee”) First .Amended Complaint, D.I. 13 for lack of personal jurisdiction and improper venue. D.I 19, D. 1.20. Plaintiffs oppose the Motion to Dismiss on grounds that GNV subjected itself to the Court's jurisdiction by engaging in a fraudulent scheme that ultimately harmed Delaware corporations. D.I. 23. Alternatively, if the Court finds a prima facie showing of personal jurisdiction has not been made as to GNV, Plaintiffs maintain that they are entitled to limited jurisdictional discovery. Id Having reviewed the Motion to Dismiss and all relevant briefing, the Court finds that limited jurisdictional discovery is warranted. Accordingly, Defendant GNV's Motion to Dismiss, D.I. 19, is DENIED without prejudice.

I. BACKGROUND

On November 8, 2023, Plaintiffs commenced this action against two former Dan Dee executives. Defendant Patrick Lee (“Lee”) and Defendant Lee Capozzi (“Capozzi”), and their new employer, Global New Ventures Group LC (“GNV”) (together, “Defendants”), “to protect its highly valuable intellectual property, trade secrets, and confidential information, as well as to protect its longstanding and prized customer relationships.” D.I. 1, ¶ 1. Plaintiffs allege that Lee and Capozzi, while still employed with Dan Dee. entered a conspiracy with GNV to steal and misappropriate Dan Dee's copyrighted product designs, trade secrets, and other confidential information to solicit business from Dan Dee's retail customers. D.I. 13, ¶ 1.

Plaintiffs Dan Dee manufacture stuffed animals and other plush toys have long-standing relationships with major U.S. retailers, such as Walmart, that sell Plaintiffs' products to their customers. Id., ¶ 2. According to Plaintiffs, “to protect its investments, Dan Dee takes affirmative steps to safeguard its confidential customer data, including by restricting access and requiring employees to execute agreements containing restrictive covenants, including non-disclosure and confidentiality obligations.” Id., ¶ 3. Thus, Capozzi and Lee, as two of Dan Dee's high-level executives, both executed employment agreements with Dan Dee that obligated Capozzi and Lee to safeguard Dan Dee's confidential information from disclosure. Id., ¶ 4. Also included in the employment agreements were non-solicitation and non-competition restrictions that prohibited Capozzi and Lee from working with Dan Dee's competitors and soliciting Dan Dee's clients. Id., ¶¶ 37-40. According to Plaintiffs, the employment agreements also included forum selection provisions that assigned any disputes arising from or regarding the agreements to the jurisdiction of a Delaware court.^[1] Id., ¶¶ 17,19.

Despite their obligations to abide by the restrictive covenants in their respective employment agreements, Plaintiffs allege that C apozzi and Lee departed from Dan Dee in April and May 2023, respectively, to work for GNV, one of Dan Dee's competitors. Id., ¶¶ 13-14. According to Plaintiffs, an investigation conducted by Dan Dee sometime after revealed that Capozzi and Lee engaged in an illicit scheme to misappropriate Dan Dee's sketches to the benefit of GNV. Id., ¶ 5. Plaintiffs .allege that, in a recovered email from June 27, 2023, for instance, Plaintiffs learned that Lee contacted one of Dan Dee's largest retail clients, Walmart, and “brazenly provided Walmart with a set of product sketches that he had clearly pilfered from Dan Dee.” Id. Plaintiffs' investigation similarly uncovered emails in which Lee provided Capozzi with photographs of Dan Dee's stuffed animals and plush toys from the prior Valentine's Day, Easter, Halloween and Christmas seasons. Id. Finally, Plaintiffs allege that, on at least one occasion, Lee shipped to Capozzi a box of Dan Dee plush toys “to supply a blueprint for further merchandise that Capozzi and Lee would use for the benefit of GNV and to the detriment of Dan Dee.” Id., ¶ 64.

According to Plaintiffs, by engaging in unauthorized and fraudulent conduct to misappropriate Dan Dee's confidential, proprietary, and trade secret information, Lee and Capozzi violated the terms of their employment agreements. Id., ¶ 128. Plaintiffs allege that GNV knew or should have known that Capozzi and Lee were each subject to various contractual obligations. Moreover, according to Plaintiffs. GNV targeted Capozzi and Lee because they were senior executives at Dan Dee. Id., ¶ 20(vi)(A)-(B). Thus, Plaintiffs contend that GNV was “intricately involved” in Lee and Capozzi's scheme to misappropriate Dan Dee's property and poach Dan Dee's major retail customers. Id., ¶ 81; D.I. 23 at 6. On July 17 and July 18, 2023, counsel for Dan Dee sent letters to Capozzi, Lee, and GNV requesting that each cease and desist from any further improper use and dissemination of Dan Dee's confidential, proprietary information and copyrighted works. D.I. 13, ¶¶ 6-7.

Pursuant to the Delaware choice of law provisions in Capozzi and Lee's agreements, Plaintiffs filed suit against Lee and Capozzi before this Court, raising claims against both men for copyright infringement, breach of contract, and unfair competition. Id., ¶¶ 17-19. Plaintiffs similarly brought five causes of action against GNV, in particular (i) copyright infringement, (ii) violation of the Federal Defend Trade Secrets Act, (iii) unfair competition, (iv) conversion, and (v) conspiracy to convert property.

On January 26, 2024. Defendant GNV made a special appearance for the limited purpose of moving this Court to dismiss the First Amended Complaint. D.I. 20. According to GNV, dismissal is warranted because the Court lacks personal jurisdiction over GNV, an Arkansas corporation with its principal place of business in Arkansas that “does not sell items to any company having a principal place of business in Delaware,” “does not have any offices, employees, agents, mailing address, or telephone numbers in Delaware.” and “was unaware of any restrictive covenants or forum selection clauses" when it hired Capozzi and Lee. Id. at 1-2. For similar reasons, GNV argues that Delaware is not a proper venue for the litigation. Id. at 3.

IL LEGAL STANDARD

A. Personal Jurisdiction Under Rule 12(b)(2)

Federal Rule of Civil Procedure 12(b)(2) requires the Court to dismiss any case in which it lacks personal jurisdiction. Fed.R.Civ.P. 12(b)(2); E.I. DuPont de Nemours & Co. v. Rhodia Fiber & Resin Intermediates, 197 F.R.D. 112,119 (D. Del. 2000). The determination of whether the court has personal jurisdiction over a party requires a two-part analysis. E.I. DuPont de Nemours, 197 F.R.D. at 119. First, the court must determine whether a defendant's actions fall within the scope of a state's long-arm statute.. Id. Second, the court must determine whether the exercise of jurisdiction comports with the Due Process Clause of the Constitution. Id. “The Delaware long-arm statute, 10 Del. C. § 3104(c), is to be broadly construed to confer jurisdiction to the maximum extent possible under the Due Process Clause.” Kabbaj v. Simpson, 547 Fed.Appx. 84, 86 n.6 (3d Cir. 2013) (citing LaNuova D & B, S.p.A. v. Bowe Co., 513 A.2d 764, 768 (Del. 1986)); see also Eurofins Pharma U.S. Holdings v. BioAlliance Pharma SA, 623 F.3d 147,155 (3d Cir. 2010); RMG Media, LLC v. iBoats, Inc., No. 20-290-RGA, 2021 WL 1227730, at *2 (D. Del. Mar. 31,2021) (citing AstraZeneca AB v. Mylan, 72 F.Supp.3d 549,552 (D. Del. Nov 5,2014)).

Constitutional due process is satisfied if “sufficient minimum contacts exist between the defendant and the forum state to satisfy traditional notions of fair play and substantial justice.” TriStrata Tech., Inc. v. Emulgen Labs., Inc., 537 F.Supp.2d 635, 641 (D. Del. 2008); see also Int'l Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945). “In undertaking this ‘minimum contacts' analysis, the Supreme Court has focused on the nature and extent of ‘the defendant's relationship to the forum State.'” RMG Media, 2021 WL 1227730, at *2 (quoting Bristol-Myers Squibb Co. v. Superior Court of Cal., San Francisco Cty., 137 S.Ct. 1773, 1779 (2017)). The purpose of this requirement is to ensure that “defendant's conduct and connection with the forum state are such that he should reasonably anticipate being haled into court there.” TriStrata Tech., 537 F.Supp.2d at 641 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286,297 (1980)).

“The plaintiff bears the burden of establishing that the defendants are properly subject to the court's jurisdiction.” Nespresso USA, Inc. v. Ethical Coffee Co. SA, 263 F.Supp.3d 498, 502 (D. Del. 2017). If no evidentiary' hearing has been held, a plaintiff “need only establish a prima facie case of personal jurisdiction.” O'Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 316 (3d Cir.2007). A plaintiff “presents a prima facie case for the exercise of personal jurisdiction by establishing with reasonable particularity sufficient contacts between the defendant and the forum state.” Mellon Bank (E.) PSFS, Nat Ass'n v. Farino, 960 F.2d 1217, 1223 (3d Cir.1992). On a motion to dismiss for lack of personal jurisdiction, “the plaintiff is entitled to have its allegations taken as true and all factual disputes drawn in its favor.” ...