The United States Court of Appeals for the Fourth Circuit recently affirmed the denial of jurisdiction by the United States District Court for the Eastern District of Virginia over two companies foreign to the Commonwealth of Virginia. See Consulting Engineers Corp. v. Geometric, Ltd., --- F.3d ---, 2009 WL 738165 (4th Cir. Mar. 23, 2009). Consulting Engineers Corporation (“CEC”) sued Geometric Limited and another company, Structure Works, LLC, in Virginia, for claims arising out of Geometric’s hiring of one of CEC’s critical employees.
Structure Works, a Colorado corporation, hired Geometric, an Indian corporation, to handle a software design project in India. Structure Works suggested that CEC assist Geometric with one aspect of the project, which the two companies agreed to pursue. CEC and Geometric therefore entered into a non-disclosure agreement (NDA I), which included a restriction on recruiting certain employees from the other. CEC also negotiated a separate non-disclosure agreement (NDA II) with Structure Works. In each of these two negotiated agreements, each of the companies, through e-mail and a few telephone calls, negotiated from their respective home state or country (Virginia for CEC, Colorado for Structure Works, and India for Geometric). NDA II contained a choice of law and forum selection clause provision naming Colorado. NDA I contained only a choice of law provision naming Virginia.
After executing the NDAs, the parties held one face-to-face meeting in India, after which time negotiations continued for a few months before Structure Works and Geometric ultimately went their separate way from CEC. During those few months, Geometric had hired away from CEC one of the employees specifically listed in NDA I as protected from solicitation by Geometric. CEC eventually sued both Structure Works and Geometric in Virginia State Court for claims relating to the hiring away of the employee. Specifically, it alleged tortious interference, conspiracy to injure another in trade, and violation of Virginia’s Uniform Trade Secrets Act. The Defendants removed the case to federal district court and then moved to dismiss for lack of personal jurisdiction, a motion granted by the district court.
CEC appealed to the Fourth Circuit, arguing that the exchange of e-mails and telephone calls was sufficient to establish “minimum contacts” with Virginia, where it was located and where it brought the action, in part because of the heavy reliance on technology in the negotiation and execution of the NDAs. CEC also argued that the choice of law provision in NDA I indicated that the Defendants had agreed to jurisdiction in Virginia. Finally, CEC argued that the “effects” of the allegedly tortious action (hiring away the employee in India) occurred in Virginia. For these reasons, CEC argued, the district court had erred in granting the motion to dismiss. In response, the Defendants pointed out that they had not been to Virginia, they did not operate in Virginia, the telephone calls were limited, and the e-mails insufficient to establish specific jurisdiction over them. Likewise in favor of a lack of jurisdiction was the fact that the choice of law provision in NDA I was not a forum selection clause and therefore only persuasive at best as to jurisdiction.
The Fourth Circuit had little trouble agreeing with the Defendants. It relied on all of the factors above in refusing to find that the district court had erred in rejecting specific jurisdiction over the Defendants. Notably, the Fourth Circuit considered the emphasis on technology to be a red herring, noting that “technology cannot eviscerate the constitutional limits” on a state’s jurisdiction. It also recognized that India was the only place in which the alleged conduct occurred, the only place the parties had met, and the only place in which the subject matter of the agreements would be pursued. Thus, the Fourth Circuit affirmed the motion to dismiss.
In sum, the Fourth Circuit’s decision held that negotiations with a company located in the forum state does not alone subject a company to jurisdiction in the forum state. Moreover, e-mails and telephone calls are not themselves sufficient to satisfy jurisdiction because technological means of communications are entitled to no special considerations in determining jurisdiction. Finally, the Fourth Circuit recognized a distinction between choice of law provisions and forum selection clauses: the former concerns which law is to be applied in the lawsuit and the latter where the lawsuit is to be brought.