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BFV Perspectives, Noncompete & Trade Secrets, | Feb 20, 2013

Personal Jurisdiction Found Based on Knowing Access to Employer’s Computer Servers

In the digital era, lawsuits against a departing employee often involve claims and allegations arising from employees’ computer fraud and/or misconduct.  An issue that courts must frequently tackle in these cases, particularly when an employee works remotely and/or is located in a different jurisdiction than the one where the computers that he or she accessed are located, is whether a court where the employer and its computers are located may exercise personal jurisdiction over the employee who resides and worked for the employer in a different state.

In December 2012, the United States Court of Appeals for the Second Circuit found personal jurisdiction in Connecticut where a party knowingly accessed computer servers located within that state.  MacDermid, Inc. v. Deiter, No. 11-5388-cv (2d Cir., December 26, 2012).  This holding may help empower employers to litigate in their home states.

In MacDermid, the Plaintiff corporation had its principal place of business in Connecticut and, though its Canadian subsidiary, employed Deiter, a resident and citizen of Ontario, Canada. After Deiter learned that her employment would soon be terminated, she used her MacDermid computer in Canada to forward allegedly confidential and proprietary MacDermid data from her MacDermid email account to her personal email account.  Deiter had to access MacDermid’s computer servers in Connecticut both to access the information and to email the files.

MacDermid sued Deiter in the United States District Court for the District of Connecticut, alleging unauthorized access and misuse of a computer system in violation of Connecticut’s Computer Crimes statute and misappropriation of trade secrets. MacDermid alleged personal jurisdiction based on the Connecticut long-arm statute.  Deiter moved to dismiss for lack of personal jurisdiction.

The District Court found no personal jurisdiction under the Connecticut long-arm statute, finding that that Deiter had merely sent an email “from one computer in Canada to another computer in Canada” when she sent the MacDermid files to her personal email.  It accordingly granted Deiter’s motion to dismiss.

The Second Circuit reversed, finding that the Connecticut long-arm statute applied to persons outside the state who remotely accessed computers within the state and, accordingly finding jurisdiction under the long-arm statute. The Court then considered whether the exercise of personal jurisdiction over Deiter accorded with due process.  In assessing this question, the Second Circuit noted that a Connecticut court has personal jurisdiction over a nonresident foreigner who has “purposefully directed his activities at residents of the forum” where “the litigation results from alleged injuries that arise out of or relate to those activities.”  Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (internal quotation marks omitted).

The key fact for the Second Circuit in finding purposeful availment was Deiter’s knowledge that the servers to which she gained access were located in Connecticut.  The Court acknowledged that most computer users are unaware of the physical whereabouts of servers to which they connect while conducting internet activity.  In such cases, a computer user might not be found to have directed his activity toward the state in which the servers are located.  However, here, the fact that Deiter knowingly directed her allegedly tortious conduct toward MacDermid’s Connecticut servers made the exercise of personal jurisdiction appropriate.

The Second Circuit in MacDermid, then, may grant employers in Connecticut and potentially within the rest of the Circuit a powerful tool to litigate in their home fora.  Under the Second Circuit’s analysis, as long as an employee is made aware of the state in which a company’s servers are housed, if an employee improperly accesses those servers then personal jurisdiction over the employee in that state does not run afoul of due process.  In other states that have long-arm statutes similar to Connecticut’s, then, MacDermid may open the door for employers to bring computer-related claims on their home turf.

BFV Perspectives, Noncompete & Trade Secrets, | Feb 20, 2013