Mitek Corpation v. Diedrich

CourtDistrict Court, N.D. Illinois
DecidedOctober 18, 2018
Docket1:18-cv-01453
StatusUnknown

This text of Mitek Corpation v. Diedrich (Mitek Corpation v. Diedrich) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mitek Corpation v. Diedrich, (N.D. Ill. 2018).

Opinion

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

MITEK CORPORATION, ) ) Plaintiff, ) 18 C 1453 ) vs. ) Judge Feinerman ) BRAD DIEDRICH and AFCO, INC., ) ) Defendants. )

MEMORANDUM OPINION AND ORDER Mitek Corporation sued Brad Diedrich, its former employee, and AFCO, Inc., his current employer, alleging that Diedrich breached his employment contract with Mitek, that AFCO tortiously interfered with that contract, and that both misappropriated Mitek’s trade secrets in violation of the Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1836 et seq., and Illinois law. Doc. 1. Diedrich and AFCO separately move to dismiss under Civil Rule 12(b). Docs. 19, 23. The motions are granted—AFCO is dismissed under Rule 12(b)(2) for want of personal jurisdiction, and Diedrich is dismissed under Rule 12(b)(7) given Mitek’s forfeiture of any opposition to Defendants’ argument under Rule 19 that AFCO is a necessary party without which the case cannot proceed in equity and good conscience. Background In resolving a Rule 12(b)(2) motion, the court considers the complaint’s well-pleaded allegations and the evidentiary materials submitted by both sides. No party has requested an evidentiary hearing, so the court must accept Mitek’s factual averments and resolve all factual disputes in its favor. See Felland v. Clifton, 682 F.3d 665, 672 (7th Cir. 2012) (“[W]here, as here, the issue [of personal jurisdiction] is raised on a motion to dismiss, the plaintiff need only make a prima facie showing of jurisdictional facts. We therefore accept as true all well-pleaded facts alleged in the complaint and resolve any factual disputes … in favor of the plaintiff.”) (citation omitted); Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782-83 (7th Cir. 2003). The facts are set forth as favorably to Mitek as those materials allow. See

Meade v. Moraine Valley Cmty. Coll., 770 F.3d 680, 682 (7th Cir. 2014). In setting forth the facts at this stage, the court does not vouch for their accuracy. See Jay E. Hayden Found. v. First Neighbor Bank, N.A., 610 F.3d 382, 384 (7th Cir. 2010). Diedrich, a Wisconsin resident, worked from May 2003 through September 2017 for Mitek, an Illinois corporation that designs, manufactures, engineers, and sells audio equipment. Doc. 1 at ¶¶ 1-2, 4, 43. Diedrich split his working time between his home in Wisconsin and Mitek’s office in Illinois. Id. at ¶ 43. In 2007, Mitek promoted Diedrich to Senior Engineering Manager. Id. at ¶¶ 4, 14. Over time, Diedrich learned Mitek trade secrets and confidential information “[p]ursuant to his job duties.” Id. at ¶ 26. In 2016, Diedrich signed a contract promising not to reveal the

secrets and information. Id. at ¶¶ 17-18; Doc. 1-2 at 2-3. The contract has an Illinois choice-of- law clause and includes non-competition and non-solicitation covenants. Doc. 1 at ¶¶ 18-19; Doc. 1-2 at 3-4. In April 2017, Diedrich accompanied Mitek President and CEO John Ivey to a Hong Kong electronics fair at which one of Mitek’s business partners, EVR, proposed to sell Mitek a digital signal processing (“DSP”) amplifier. Doc. 1 at ¶ 32. Ivey asked EVR to send Diedrich information regarding the proposal, but Diedrich never “evaluated or put his work efforts into the proposal on behalf of Mitek.” Id. at ¶¶ 32-33. Soon after the fair, EVR agreed to work with a Mitek division called MTX to develop the DSP amplifier. Id. at ¶¶ 2-3, 33. After executing a Mutual Confidentiality Agreement with Mitek, EVR sent an “MTX prototype/sample of a new EVR DSP amplifier” to Mitek’s Arizona office. Id. at ¶ 33. Diedrich “viewed and examined” the prototype in Arizona. Ibid. In September 2017, Diedrich resigned from Mitek and accepted a “nearly identical

position” with AFCO, a Tennessee company that, like Mitek, designs, manufactures, engineers, and sells audio equipment. Id. at ¶¶ 6-7, 27. AFCO knew when it hired Diedrich that he had carried out some duties for Mitek at Mitek’s Illinois office. Doc. 38 at 4. After joining AFCO, Diedrich misappropriated Mitek’s trade secrets by contacting EVR and asking it to sell AFCO the same DSP amplifier that it had made for Mitek. Doc. 1 at ¶ 33. As a result, AFCO can now “easily create a competing product which ha[s] features identical to the MTX prototype” using the trade secrets and confidential information to which Diedrich was exposed. Id. at ¶ 34. Diedrich currently works for AFCO from his home in Wisconsin, developing products intended for the 12-volt specialists and powersports markets and other products that compete with Mitek products. Id. at ¶ 44; Doc. 38 at 6. Although AFCO’s principal place of business is

in Tennessee, it carries out some business activities in Illinois. Doc. 1 at ¶ 11. Specifically, AFCO sells products in Illinois; makes its products available to Illinois consumers; contracts with Illinois sales representatives, who in turn solicit Illinois retailers to buy AFCO products directly from AFCO; and designates “authorized retailers,” which customers can locate using an interactive feature on AFCO’s website. Doc. 38 at 1-2. AFCO hopes to increase its representatives’ sales in Illinois by ten to twenty percent this year, and has directed at least one of those representatives to “aggressively pursue prospects” for increasing sales in the 12-volt specialists and powersports markets. Id. at 2. AFCO and its agents extend credit to retailers, set prices, educate and direct sales representatives, and distribute promotional material to retailers in Illinois. Id. at 2-3. Discussion I. Personal Jurisdiction over AFCO

“In a federal question case such as this one, a federal court has personal jurisdiction over the defendant if either federal law or the law of the state in which the court sits authorizes service of process to that defendant.” Mobile Anesthesiologists Chi., LLC v. Anesthesia Assocs. of Hous. Metroplex, P.A., 623 F.3d 440, 443 (7th Cir. 2010). “Because the [DTSA] does not have a special federal rule for personal jurisdiction,” the court must “look to the law of the forum for the governing rule.” Advanced Tactical Ordnance Sys., LLC v. Real Action Paintball, Inc., 751 F.3d 796, 800 (7th Cir. 2014); see also KM Enterprises, Inc. v. Glob. Traffic Techs., Inc., 725 F.3d 718, 723 (7th Cir. 2013) (describing “the mechanics for asserting personal jurisdiction in federal court” under Rule 4(k)); AlixPartners, LLP v. Brewington, 836 F.3d 543, 549 (6th Cir. 2016) (“When a federal court’s subject-matter jurisdiction is based on a federal question, the court’s

exercise of personal jurisdiction must be both authorized by the forum State’s long-arm statute and in accordance with the Due Process Clause of the Fourteenth Amendment.”); Mission Measurement Corp. v. Blackbaud, Inc., 287 F. Supp. 3d 691, 706 (N.D. Ill. 2017) (“The Defend Trade Secrets Act does not have nationwide service of process that would confer personal jurisdiction over all Defendants, therefore, the Court may exercise personal jurisdiction over Defendants only if personal jurisdiction would be proper in an Illinois court.”).

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Mitek Corpation v. Diedrich, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mitek-corpation-v-diedrich-ilnd-2018.