The Second Circuit’s decision in MacDermid, Inc. v. Deiter, No. 11-5388-cv (2d Cir., Dec. 26, 2012), highlights the fact that where an email goes can be as important as what it says. The court found that an employee’s knowing transmission of an email via a computer server located in Connecticut was a sufficient basis for a Connecticut court to exercise personal jurisdiction over that employee under the state’s long-arm statute. The decision suggests this is true regardless of the lack of other contacts with the forum state. The court’s analysis raises serious considerations in a world where data storage in the “cloud” is becoming increasingly common for individuals and businesses. Individuals transmitting electronic communications via servers located in far-away states—such as through Gmail®, Twitter®, FaceBook®, Yahoo®, wireless providers, and employer networks—could find themselves subject to personal jurisdiction in those states depending upon their respective long-arm statutes. The court did not have occasion to address whether the same principle would apply to a corporate defendant, but the court’s analysis suggests that companies with network or “cloud” servers located in states with which those companies otherwise have no significant contacts could find themselves subject to the jurisdiction of courts in those states.
The plaintiff, chemical company MacDermid Inc., has its principal place of business in Waterbury, Connecticut. The defendant, Jackie Deiter, worked for a MacDermid subsidiary in Mississauga, Ontario, Canada. MacDermid terminated Dieter in April 2011. On the eve of her termination, Dieter forwarded allegedly confidential and proprietary data files from her MacDermid corporate account to a personal email address shortly before her termination. In so doing, the company files were downloaded from a computer server located in Connecticut to a personal computer in Canada.
MacDermid sued Deiter, alleging unauthorized access and misuse of a computer system and misappropriation of trade secrets in violation of Connecticut General Statute §§ 53a-251 and 35-51 et seq. MacDermid claimed personal jurisdiction over Dieter in part on Connecticut’s long-arm statute, which provides that a court “may exercise personal jurisdiction over any non-resident individual” who “uses a computer…or computer network…located within the state.” Conn. Gen. Stat. § 52-59b(a).
Deiter moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction, arguing that her utilization of the host computer server in Connecticut was both passive and unknowing, given that her only conscious act was to use her company laptop to transfer files to her home computer for the purpose of printing materials for meetings. The motion was successful, with the judge holding that Deiter had not “used” a computer network located in the state in the manner required by the statute. The opinion also noted that Deiter had “merely emailed herself information from one computer in Canada to another computer in Canada,” and that if the legislature had intended the definition of “computer network” to encompass the “internet,” it would have indicated so deliberately, as it had in other statutes.
After MacDermid appealed the decision, a unanimous three-judge panel reversed the lower court and rejected its narrow view of the long-arm statute. Circuit Judge Barrington Parker stated that MacDermid’s server qualified as a “computer” under Connecticut law, and that it did not matter that Deiter had only accessed the servers from outside the state because the statute only required that the computer itself be located in Connecticut.
The Second Circuit also held that this exercise of jurisdiction met the constitutional requirement of due process, stating that while many defendants would not know the location of servers where confidential and proprietary documents would be stored, the allegations of the complaint, assumed to be true, indicated that all MacDermid employees, including Deiter, were informed of the Waterbury servers as a condition of employment. This awareness of the location and Deiter’s deliberate use of the servers provided sufficient minimum contacts with the forum state to warrant personal jurisdiction.
The court’s reliance upon the specific allegation that Deiter knew the location of the server she accessed may limit the potential applicability of the MacDermid decision to other contexts. Extending personal jurisdiction based upon nothing other than “use” of a computer server located in a forum state via the internet has the potential to dramatically expand the reach of courts around the country. Studies show that more than one billion people actively use Facebook® on a monthly basis, and over 140 million Twitter® users post some 340 million Tweets® each day. Businesses of all sizes are increasingly moving company data to “cloud” storage providers and accessing that data via servers located around the country, or moving their own network servers—for cost reasons—to states with which they otherwise might have no significant contact. Companies and individuals like Deiter may now be exposed to jurisdiction in states where the only contact is the use of a server the company or individual knows is located in the state. For plaintiffs trying to determine whether a preferred forum might have jurisdiction over an intended defendant, they ought to consider the defendant’s internet use in connection with the desired forum state.
A discussion of the trade secret implications, check out Crowell’s client alert: Trade Secret Client Alert.