Genis v. Campbell, et al. (Lawyers Weekly No. 09-009-18)
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss.SUPERIOR COURT
CIVIL ACTION
- 2017-01798-BLS2
ALFRED R. GENIS
vs.
MARTIN CAMPBELL, DAVID CAMPBELL,
PURE CRYSTAL, LLC, & JOHN DOE’s 1-10
MEMORANDUM OF DECISION AND ORDER ON DEFENDANTS’
MOTIONTO DISMISS FOR LACK OF PERSONAL JURISDICTION
Alfred R.Geniscommenced this action against Martin Campbell (Martin), David Campbell (David),andPure Crystal, LLC (Pure Crystal),asserting that they, together with other unknown individuals, improperly disclosedhis confidentialinformationand trade secrets and failed to provide him equity in Pure Crystal as required by a 2013 agreement. 1 The matter is now before the Court on the named defendants’ motionto dismiss for lack of personal jurisdiction pursuant to Mass. R. Civ. P. 12(b) (2). For the reasons that follow, the motion isDENIED.
1 The Complaint is also brought against “John Doe 1-10,” which the Complaint alleges are persons whose true names are unknown but who are “responsible agents, principals, alter egos, [or] co-conspirators”of the named defendants.
BACKGROUND
The following is taken from theaffidavitthatGenisfiled in opposition to defendants’ motion, and the affidavits submitted by defendantsto the extent they are not disputed by Genisor contradict his affidavit.
Genis, a resident of Massachusetts,is one of world’s leading diamond laboratory scientists. In May 2013, Genis delivered a professional paper at the International Technical 2
Diamond Conference concerning the mass production of diamonds using chemical vapor deposition (CVD) technology for industrial applications.Martin, who owned Pure Crystal with his brotherDavid,learned of this presentation and inearlySeptember 2013, reached out to Genis seeking assistance with Pure Crystal’s efforts to grow laboratory diamonds.The two agreed to meet to discuss a possible business relationship.
On September 11, 2013, Martin flewfrom Ohio, where he and his brother reside,to Bostonand met with Genis. At their meeting, Martin explained that Pure Crystalhad purchased two microwave-poweredplasmareactors capable of producing diamonds but lacked the software necessary to growdiamonds suitable for commercialization. He hoped Geniscould help Pure Crystalcreate that software.Genis expressed interest in working with Martin but notedthat he was more interested indeveloping diamonds utilizing direct-current (DC) reactor technology, which he believed to be superior. Genis also expressed that he wanted to keep Boston as his primary workplace because he had recently been diagnosed with throat cancer and needed to remain in the city for treatment. Martin indicated that Geniscould remain in Boston and that in exchange for Genis’assistance and technology, he would help Genis buildaDC reactor. Following the meeting, they spoke by telephone on one or two moreoccasionsin Septembertosort outthe details of their business relationship,and Genis beganprovidingtheinformation Pure Crystal needed to grow diamonds in its reactors. That month, Genis received a paycheck from Pure Crystal.
On October4,2013, Genis met with Martin and David at Pure Crystal’s office in Ohioandthe threeexecuted an agreement (October 2013 Agreement)thatmemorializedthediscussionsbetween Martin and Genis. TheOctober 2013 Agreement provided that Genis would be paid $ 12,500 per month by an unnamed entity owned by Martin and David, would be 3
made Pure Crystal’s Chief Technology Officer (CTO), and would receive 25 percentof the sharesof Pure Crystal for his services as CTO. The Agreement further provided that they would form two companies. The first, identified as “Reactor Building Company,” would support Genis’ development of a DC reactorfor purchase by Pure Crystal. Genis would own 45 percentof the company and Pure Crystal would pay Genis’ design and construction expenses. The second company, identified as “Diamond Application Company,” would support the development and sale of technology for useof diamonds in non-gem applications. Genis would own 55 percentof the shares of this company. After executing the Agreement, Genis returned to Boston and continued his work for Pure Crystal. He received additional paychecks from Campbell Technology Resources, which was another company owned by Martin and David.
In mid-October2013, Martinand David formed a newOhio-basedcompanycalled Kimberlite Applied Science, LLC (Kimberlite) to serve as the Reactor Building Company identified in the October 2013Agreement. Approximately a month later, Martin emailed Genis anEmployment Agreement andarelatedExclusiveLicense Agreement for signature by Genis and Kimberlite, which Genis executed.2 The Employment Agreement provided that Genis would be CTO of Kimberlite, receivesan annual base salary of $ 150,000, and holdsa 45 percentequity interest in Kimberlite. In his roleas CTO, Genis wasrequiredto “devote [his] full business time, attention, skill and energy to the business and affairs of [Kimberlite]”but would have the “right”to “act as an officer of (i) Pure Crystal, LLC . . . in accordance with an employment agreement to be executed by Genis and Pure Crystal, and (ii) a limited liability companywhich will be an
2 Defendants have provided copiesof the Employment and License Agreements, which are attached to an affidavit submitted by Martin. The agreements bear Genis’ signature. However, it does not appear that they were countersigned. The Court also notes that the License Agreement provides that Kimberlite “owns the intellectual property rights described in Schedule 1 of theAgreement”and references a Schedule 4.7 that supposedly contains a list or description of all the intellectual property subject to the Agreement. See License Agreement at p.1 and ¶ 4.7. However, Schedule 1 is blank andnoSchedule4.7is attached. The Agreement does not otherwise appear to describe the relevant intellectual property.4
affiliate of [Kimberlite]and will be in the business of developing, marketing and/or selling Chemical Vapor Deposition single crystal diamondfor non-gem applications[i.e.,the Diamond Application Company referred to in the October 2013 Agreement]in accordance with an employment agreementto be executed by Genis and such company.”Employment Agreement at ¶ 1.2.At some point thereafter, Kimberlite started paying Genis’ salary from its Ohio bank account.
From October 2013 until early 2016, Genis worked full-time, mostly from hisMassachusettshome,developing the technology for growing diamonds inPure Crystal’s microwave reactorsas well as developinga DC reactor for Kimberlite. In connection with his work for Pure Crystal, Genis engaged in hundreds of telephone and email communications with Martinand David about technical issues related to Pure Crystal’smicrowave reactors.He also communicated extensively with David King and Larry Eckhart, both Pure Crystal engineers, by email and telephone. Genis participated in all these communications from his home in Massachusetts.
In addition tocommunicating by telephone and email, Genis also spent significant time at his home analyzing samples of diamonds grown in the Pure Crystal’s microwave reactorsin Ohio. These samples were sent on a regular basis to Genis between 2014 and 2016. Genis reported his results by telephone and email and provided recommendations to improve the product. Additionally,during this time period,Genis arranged for the purchase of equipment and supplies for use in Pure Crystal’s microwave reactors. As a result of Genis’ work, Pure Crystal began producinghigh grade diamonds.
In connection with his work for Kimberlite, Genis partnered with CVD Equipment Corporation(CEC), a company based in New York,to constructthe DC reactor.Martin and 5
other individuals from Pure Crystalwerenot heavily involved in the construction process. Martinprimarilyapproved the purchase orders and paid CEC’s invoices. In late summerof September 2015,however,the development of the DC reactor encountered some problems and Martin instructed Genis to have CEC ship the DC reactorfrom New Yorkto Ohio, even though CEC was in the process of resolving the issue at itsNew York facility.
In January 2016, during a visit to Ohio, Martin informed Genis that he was negotiating the sale of Pure Crystal and its technology for $ 100 million. He told Genis that he should return to, and plan on remaining, in Boston to assist the prospective buyer’s diligence. Genis did as requestedand began preparing presentation materials. During this time, Genis continued to provide technical assistance to Pure Crystal to help increase production load sizes.
In late 2016, Genis learned that the “word on the street” was that Martin was sharing or selling the technology Genis had developed for Pure Crystal to others. Genis confronted Martin about this and their relationship became strained. Around this time, Martinput the development of the DC reactor on hold andtold Genis that he and David were going to stop paying his salary through Kimberlite. Martin, however, indicatedthat his position asCTO of Pure Crystal and his 25 percentinterest in the company would not change.
In early 2017, Martin changed course and took the position that Genisdid not ownan interest in Pure Crystal. At this time, Genis began receiving additional information from othersin the industry that Martin had been sharing his technologywith scientists fromMichigan State University. As a result of these developments, Genis filedthe present lawsuit in which healleges that defendantsimproperly shared his confidential information and trade secrets and breached the October 2013 Agreement by failing to provide him with a 25 percentequity interest in Pure Crystal. Genisbrings claims for trade secret misappropriation under G.L. c. 93, § 42 (Count I), 6
violation of G.L. c. 93A (Count II), unjust enrichment (Count III), breach of the covenant of good faith and fair dealing (Count IV), breach of contract (Count V), intentional misrepresentation and deceit (Count VI), quantum meruit (Count VII), and promissory estoppel (Count VIII).
DISCUSSION
Defendants assert that the Court lacks personal jurisdiction over them on two grounds. First, they contend that the Court does not have jurisdiction over the matter because of forum selection clauses in both theKimberliteEmployment and License Agreements. Second, they argue that, quite independent of these clauses, Genisis unable to satisfy the requirements of the MassachusettsLong Arm Statute, G.L.c. 223A, § 3or of due process.
Turning to defendants’ first argument,the Court notesas an initial matterthatdefendantsmay not have standing to enforce the forum selection clausessince they are not parties to the Kimberlite Employment and License Agreements. See TrySwitch, Ltd. v. Endurance Int’l Group, 2013 Mass. App. Unpub. LEXIS 567, at *1-2(May 16, 2013) (observing that “[w]e have found no Massachusetts case permitting a nonparty to a contract to enforce a forum selection clause against a party to the contract”). Regardless of defendants’ standing, however, this Court concludes that the forum selection clausesin thetwo Agreements donot apply to the present dispute.
TheKimberliteLicense Agreement’sforumselection clause provides that: “All actions or proceedings relatedtothis Agreementshall be litigated in state courts of competent jurisdiction located within the State of Ohio.”License Agreement at ¶8.5 (Emphasis added). The Employment Agreement’s forum selection clause providesthat:
EACH OF THE PARTIES IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE COURTS OF THE STATE OF OHIO FOR PURPOSESOF ANY SUIT, ACTION OR OTHER PROCEEDINGARISING OUT OF THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY 7
TRANSACTION CONTEMPLATED HEREBY OR THEREBY WITH RESPECT TO EMPLOYEES’ EMPLOYEMENT HEREUNDER. . . .
Employment Agreement at ¶ 6.7(Emphasis added).The present lawsuit doesnot relate to or arise from either of the two Agreements. Rather, this lawsuitseeks redress forthe alleged misappropriation of intellectual property Genis claims to have provided to Pure Crystalforits microwave reactors,and thealleged breach of a promise under the October 2013 Agreementto provide Genis with a 25 percentequity interest in Pure Crystal –a contract that has no forum selection clause. Defendants contend that the Employment Agreement essentially took the place of the October 2013 Agreement and thus governs this dispute, relying on a merger clause that saysthat the EmploymentAgreementsupersedes all prior agreements. But by its terms, it does so only with regard to the specificsubject matter to which the EmploymentAgreementpertains, which is Genis’ employmentas CTO of Kimberlite. It does not take the place of the October2013 Agreement withregard to other subjects, amongthem whetherGenis has an interest in Pure Crystal.
Defendantsargue in thealternative that the assertion of personaljurisdictionover them doesnot comport with the MassachusettsLong ArmStatuteor with due process requirements. See Good Hope Indus., Inc. v. Ryder Scott Co., 378 Mass. 1, 3, 5-6 (1979).As to these requirements, the plaintiffbearsthe burden of establishing sufficientfacts on which to predicate jurisdiction. Droukas v. DiversTraining Academy, Inc., 375 Mass. 149, 151 (1978). Although the defendants have requested an evidentiary hearing, courtsmore typically relyon affidavits submittedby thepartiesto determine whether plaintiff has presented enough evidence to make outa prima facie case for the assertion of jurisdiction, with a final determination to be made later at trial under a preponderance of the evidence standard. Cepeda v. Kass,62 Mass.App.Ct. 732, 737-739 (internal quotes omitted). Under this prima facie approach, the court assumesas true8
those factsaffirmatively alleged by plaintiff andconstrues them inthe “light most congenial to the plaintiff’s jurisdictional claim.”Id. at 738. This Court adopts that approach here.
Genis asserts that jurisdiction exists under Section3(a)of the Massachusetts Long Arm Statute, which requires a showing that: (1) defendantstransacted business in Massachusetts; and (2) his claimsarosefrom the transaction of business by defendants.SeeTatro v. Manor Care, Inc., 416 Mass. 763, 767 (1994). The “transacting any business” clause in G.L. c. 223A, § 3(a) has been construed broadly. Id.It applies to any purposeful act of the defendant, whether personal private, or commercial, and has been described as “easy to satisfy.” Saturn Management LLC v. Gem-Atreus Advisors, LLC, 754 F.Supp. 2d 272, 277 (D.Mass. 2010); see also Nile v. Nile,432 Mass. 390, 396 (2000). The “arising from”clause, which is also construed liberally,createsa “but for”test, which is satisfied if the plaintiff’s claim “was made possible by, or lies in the wake of, the transaction of business in the forum State.” Tatro, 416 Mass. at 770-771.Here, Genis has adequately averredfacts demonstratingthat defendantstransacted business in the Commonwealth and that his claims arose from that transaction of business.
According to Genis’affidavit, Martin, on behalf of David and Pure Crystal,flew to Massachusetts, where hesolicited Genisto assistinPure Crystal’sefforts to produce diamonds in its microwave reactors and offered Genis a job working primarily out of his Massachusetts home. After he was hired, Genis engaged in hundreds of telephone and email communications with Martin, David, and Pure Crystal engineersfrom his homein connection with his work for Pure Crystal. He also spent significant time at his home analyzing samples of diamonds grown in Pure Crystal’s microwave reactors and arranging for the purchase of equipment and supplies for use in the reactors.These facts indicatea continuous and purposeful relationship with Massachusetts. But for Martin’s solicitation of Genis in Massachusetts and defendants’ 9
subsequent communications and interactions with him, Genis would not have received the25 percentinterest in PureCrystalthat defendants’ allegedly failed to provide and Genis would not havedivulged theconfidential information that defendantsallegedly misappropriated. This is enough to satisfy the requirementsof Section 3(a).
As to whetherthe exercise of jurisdiction comports with due process, the focusofthe court’s inquiry is on whether the defendant “purposefully established ‘minimum contacts’in the forum state.”Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985), quoting International Shoe Co.v. Washington, 326 U.S. 310, 316 (1945); Tatro, 416 Mass. at 772. The assertion of jurisdiction is constitutionalif: a) theplaintiff’s claim arises out of the defendant’s contacts within the forum;b) those contacts consist of acts which suggest that the defendant purposefully availed itself of the privilege of conducting business in the forum state so as to invoke the benefits and protections of its laws; and c) the assertion of jurisdiction will not offend traditional notions of fair play and substantial justice. See Bulldog Investors Gen. Partnership v. Secretary of the Commonwealth, 457 Mass. 210, 217-218 (2010).According to Genis’ affidavit,defendantssolicitedGenisin Massachusetts toassist them with the creation of software forPure Crystal’s microwave reactorsandpromised him a 25 percentinterest in Pure Crystalin exchange for his efforts. Thereafter, defendantsutilized hisservices, which Genis provided fromhisMassachusettshome,and in the process,learned of confidential technologyand know-howin Genis’ possession. Throughthe course oftheir relationship, which lasted several years, defendantsand Genis engaged in frequent communications regarding his efforts, all while Genis residedin Massachusetts. Finally, Massachusetts hasa strong interest in adjudicating contractualand intellectual propertydisputesinvolving its residents which outweighs any inconvenience to the defendants. In short, the exercise of personal jurisdiction in this case is 10
both statutorily and constitutionally permissible.
________________________
Janet L. Sanders
Justice of the Superior Court
Dated: January 9, 2018