Appeal
from the Marion Superior Court The Honorable Heather A.
Welch, Judge Trial Court Cause No. 49D01-1612-PL-44334
ATTORNEYS FOR APPELLANT Mark D. Gerth Sarah A. Hurdle
Kightlinger & Gray, LLP Indianapolis, Indiana
ATTORNEYS FOR APPELLEES Robert D. MacGill Charles P. Edwards
Alexander P. Orlowski Leah L. Seigel Barnes & Thornburg,
LLP Indianapolis, Indiana
BAKER,
JUDGE.
[¶1]
Professional Billing, Inc. (PBI), brings an interlocutory
appeal from the trial court's denial of its motion to
dismiss the claims filed against it by Zotec Partners, LLC,
and Medical Management Professionals, LLC (collectively,
Zotec). PBI argues that dismissal is warranted because the
trial court lacks personal jurisdiction over it. Zotec argues
that the trial court should be affirmed; it alternatively
requests additional time to conduct discovery. Finding that
Indiana cannot assert personal jurisdiction over PBI and that
additional time for discovery is unwarranted, we reverse and
remand with instructions for the trial court to dismiss
Zotec's claims against PBI.
Facts
[¶2]
Zotec is a medical billing company with its principal place
of business in Carmel. In 2013, Zotec acquired a competitor,
and as part of the acquisition, Zotec agreed to retain the
competitor's CEO, G. Darrell Hulsey, who became an
executive at Zotec. Hulsey's employment agreement with
Zotec included a non-compete provision that would last for
two and one-half years after any termination of Hulsey's
employment. In February 2014, Hulsey resigned from Zotec. In
September 2016, he became PBI's CEO and purchased an
ownership stake in the company.
[¶3]
PBI is a medical billing company incorporated and
headquartered in Alabama. It has offices in Alabama,
Louisiana, Mississippi, and Ohio. It is not registered to do
business in Indiana. It has no offices, real estate,
employees, or customers in Indiana. It has no contracts with
anyone in Indiana.
[¶4]
On December 19, 2016, Zotec filed a complaint against PBI,
Hulsey, and another company.[1] On February 16, 2017, PBI filed
its first motion to dismiss for lack of personal
jurisdiction. On March 17, 2017, Zotec filed an amended
complaint against PBI, alleging that PBI violated
Indiana's Uniform Trade Secrets Act and committed
tortious interference with contract. Specifically, Zotec
alleged that PBI misappropriated Zotec's trade secrets by
obtaining them from Hulsey, knowing that Hulsey obtained
Zotec's trade secrets through improper means, and by
using them to compete with Zotec. Zotec further alleged that
PBI targeted and induced certain Zotec customers to terminate
their contractual relationships with Zotec. Zotec did not
allege that PBI solicited Zotec's customers in Indiana.
[¶5]
On April 6, 2017, in response to Zotec's amended
complaint, PBI filed a second motion to dismiss Zotec's
claims against it for lack of personal jurisdiction. In
support of its motion to dismiss, PBI submitted an affidavit
from Douglas Bush, PBI's president and CFO. In his
affidavit, Bush stated that PBI is incorporated and
headquartered in Alabama; that it has offices in Alabama,
Louisiana, Mississippi, and Ohio; and that PBI has never had
or solicited customers in Indiana, owned or leased offices or
real estate in Indiana, employed anyone in Indiana, entered
into contracts with anyone in Indiana, or registered to do
business in Indiana. Bush further stated that PBI had no
communication with Hulsey while he was employed by Zotec and
that it was not until May 2016- more than two years after
Hulsey had left Zotec-that PBI initiated conversations with
Hulsey about joining PBI. Bush also stated that he and Hulsey
are friends and that any conversations between them before
May 2016 were purely social and were undertaken by Bush as an
individual, not as a representative of PBI.
[¶6]
On May 1, 2017, Zotec opposed PBI's motion to dismiss,
arguing that PBI did not meet its burden to prove a lack of
personal jurisdiction, or, alternatively, that Zotec should
be granted additional time "to obtain the discovery it
has been seeking from Hulsey for almost four months and, if
necessary, obtain jurisdictional discovery directly from
PBI." Appellant's App. Vol. II p. 108.
[¶7]
On May 22, 2017, a hearing regarding the motion to dismiss
took place. On June 27, 2017, the trial court denied
PBI's motion, making the following findings of fact:
25. Presently, Hulsey is an owner and the Chief Executive
Officer of PBI. PBI offers medical billing and technology
solutions to physicians and other healthcare providers in
competition with Zotec.
26. PBI is a competitor of Zotec whom Zotec believes has
recently begun activity soliciting Zotec's customers.
27. Hulsey is personally soliciting Zotec's customers on
behalf of PBI through his knowledge of Zotec's
Confidential Information and trade secrets. Because of his
role at Zotec . . . Hulsey is keenly aware of Zotec's
trade secrets, . . . Zotec's proprietary software and
confidential business practices, and which clients are most
receptive to transitioning to PBI.
28. As a result of Defendants' actions, Zotec has
incurred significant damages, including lost clients.
Appealed
Order p. 5. The trial court then made the following
conclusions of law:
. . . the Court cannot but find that the facts of the case as
alleged provide this Court with specific personal
jurisdiction over PBI in this matter. The allegations against
PBI are violations of Indiana's Trade Secret Act and
tortious interference with contract. . . . [T]he allegations
on the face of the complaint argue that Hulsey was acting
intentionally and tortuously [sic] when [he] left Zotec to
join a competitor, knowing that disclosure of Zotec's
trade secrets would constitute harm to Zotec. The express aim
at the State of Indiana arises out of the alleged harms. The
Indiana Trade Secret Act is a statutory protection given to
persons and companies that conduct business in the State of
Indiana. While other states have similar trade secret acts,
Indiana's Act was created by the legislative action of
the Indiana General Assembly for the benefit of those
citizens and domiciled companies that wish to conduct
business. Committing an act which directly implicates this
statute directly involves Indiana in the alleged tortious
conduct. Essentially, the alleged misappropriation involves
taking/copying a protectable interest from an Indiana company
and disseminating it. Even if Hulsey was not an agent of PBI
when the alleged misappropriation took place, PBI placed
Hulsey as an executive within the company, giving him
significant control of the company's operations. This
dovetails with Zotec's allegation of tortious
interference with contract regarding Zotec customers. Even if
PBI had never made contact with Indiana prior to hiring
Hulsey, the allegations surrounding Hulsey's conduct and
PBI's involvement subject PBI to jurisdiction in this
Court by way of specific personal jurisdiction.
Appealed Order p. 9-10. PBI now brings this interlocutory
...