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Genesys Telecommunications Laboratories, Inc. v. Morales

United States District Court, S.D. Indiana, Indianapolis Division

November 5, 2019

GENESYS TELECOMMUNICATIONS LABORATORIES, INC., Plaintiff,
v.
DANIELLE MORALES, MICHAEL STRAHAN, MARK HERTEL, TALKDESK, INC., and RALPH MANNO, Defendants.

          ORDER ON DEFENDANTS' MOTION TO DISMISS OR, IN THE ALTERNATIVE, TO TRANSFER VENUE

          TANYA WALTON PRATT, JUDGE

         This matter is before the Court on a Motion to Dismiss or, in the Alternative, to Transfer Venue, filed pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6) by Defendants Talkdesk Inc. (“Talkdesk”), Danielle Morales (“Morales”), Michael Strahan (“Strahan”), Mark Hertel (“Hertel”), and Ralph Manno (“Manno”) (collectively, “Defendants”) (Filing No. 97). Plaintiff, Genesys Telecommunications Laboratories, Inc. (“Genesys”), initiated this lawsuit, seeking injunctive relief and damages against the Defendants for misappropriation of trade secrets, breach of contract, and tortious interference with contract, among other things. After Genesys filed its Second Amended Complaint, the Defendants filed their Motion to Dismiss based on a lack of personal jurisdiction and the failure to state a plausible claim for relief. The Defendants alternatively ask the Court to transfer this case to the Northern District of California. For the following reasons, the Court grants in part and denies in part the Motion to Dismiss and declines to transfer the case to the Northern District of California.

         I. BACKGROUND

         The following facts are not necessarily objectively true, but as required when reviewing a motion to dismiss, the Court accepts as true all factual allegations in the Second Amended Complaint (Filing No. 89) and draws all inferences in favor of Genesys as the non-moving party. See Bielanski v. County of Kane, 550 F.3d 632, 633 (7th Cir. 2008).

         Plaintiff Genesys is a California corporation with a significant presence in Indiana and is the successor to a former Indiana company, Interactive Intelligence. Genesys conducts substantial business in the state of Indiana and has corporate offices in Indianapolis, Indiana. It employs more than 800 employees in Indiana at its Indianapolis office. Its corporate headquarters is in California. Since the early 1990s, Genesys has been a longstanding and market-leading provider of cloud and on-premises customer experience and contact center solutions. It offers customer-experience platforms that enable enterprises to orchestrate and monitor multimodal omnichannel journeys and interactions (Filing No. 89 at 1, 4, 7; Filing No. 98 at 7).

         Defendant Talkdesk is a Delaware corporation with its headquarters in California. Talkdesk is an upstart company in the cloud-based call center software business. On October 3, 2018, Talkdesk announced that it had raised $100 million in Series B funding. Talkdesk is a direct competitor of Genesys, and it does business across the United States, including in Indiana, and employs personnel in Indiana (Filing No. 89 at 2, 4, 7; Filing No. 98 at 7).

         Defendant Manno was initially hired by Interactive Intelligence, now part of Genesys, as a Director of Channel Sales in August 2004. He was most recently a Vice President of Sales at Genesys. In that executive position, Manno oversaw all sales activities in Genesys' mid-market segment and managed a team of Area Directors and those Directors' Account Executives. Manno, a citizen of Missouri, signed an employment agreement containing an Indiana forum-selection clause. Id. at 4. His executive employment with Genesys ended on October 1, 2018. Manno is now employed as a Vice President of Sales with Talkdesk (Filing No. 89 at 21-22).

         Defendant Hertel was initially hired by Interactive Intelligence, now part of Genesys, as West Area Director in November 2013. Hertel was most recently an Area Director of Sales at Genesys. In that position, he oversaw all sales activities in Genesys' West Region and managed a team of Account Executives. Hertel, a citizen of California, signed an employment agreement containing an Indiana forum-selection clause and Indiana choice-of-law provision. Id. at 4-5. His employment with Genesys ended on September 28, 2018. Hertel is now employed as a Vice President of Sales with Talkdesk. Id. at 14, 17.

         Defendant Strahan was initially hired by Interactive Intelligence, now part of Genesys, as a Test Engineer in September 2000. He was most recently an Area Director of Sales at Genesys. In that position, he oversaw all sales activities in Genesys' Central Region and managed a team of Account Executives. Strahan, a resident of Indiana, signed an employment agreement containing an Indiana forum-selection clause. Id. at 4-5. Strahan's employment with Genesys ended on September 30, 2018. He is now employed as a Vice President of Sales with Talkdesk. Id. at 18- 19.

         Defendant Morales was an Account Executive employed by Genesys. In that position, she was responsible for making sales to Genesys' customers and potential customers and managing customer accounts and relationships. Morales is a citizen of California. Morales resigned her employment with Genesys effective September 28, 2018. She is now employed as an Enterprise Account Executive with Talkdesk. Id. at 9, 13.

         Manno, Hertel, Strahan, and Morales were highly-compensated, trusted executives of Genesys and were entrusted by Genesys with substantial trade secrets to perform their duties. Id. at 3. Manno, Hertel, Strahan, and Morales each entered into employment contracts that prohibited them from disclosing confidential information, soliciting Genesys' employees for a period of time after leaving employment with Genesys, and soliciting Genesys' customers for a period of time after leaving employment with Genesys.

         Talkdesk began a targeted strategy aimed at its competitor, Genesys, to recruit Genesys' sales employees in the Genesys mid-market segment (Filing No. 89 at 2). “Talkdesk's targeted raid of Genesys['] mid-market segment, including all of its top leadership, was carried out with the purpose of crippling Genesys['] mid-market sales organization.” Id. at 49. In a short time span beginning in September 2018, at least fourteen Genesys employees targeted by Talkdesk left their employment with Genesys and accepted employment with Talkdesk. Half of the Genesys mid-market Vice Presidents left Genesys for Talkdesk, two-thirds of the mid-market Area Directors went to Talkdesk, and approximately a quarter of the Genesys mid-market sales executives across the country left Genesys to work for Talkdesk. A Technical Sales Consultant also left Genesys for Talkdesk. Id. at 2. Four of these former Genesys employees are Defendants Morales, Strahan, Hertel, and Manno. During the recruiting process, Talkdesk encouraged Genesys' employees to conduct a demonstration using Genesys' products to disclose and discuss proprietary and confidential information relating to Genesys for the benefit of Talkdesk. Id. at 7.

         In or around August 2018, Talkdesk CEO Tiago Paiva (“Paiva”) personally recruited Strahan, Hertel, Manno, and others during a conference call. Paiva encouraged these Genesys executives to come to Talkdesk and build up Talkdesk's sales organization contrary to their contractual obligations to Genesys. Hertel and Strahan had between six and ten conversations around this time, and the two influenced each other to leave Genesys for Talkdesk. Manno and Hertel had between ten and fifteen discussions, during which Manno influenced Hertel to leave Genesys and build Talkdesk's sales organization. Manno also informed Hertel that he was recruiting others, including Strahan. Id. at 7, 16, 19, 22.

         While still employed by Genesys but having committed to joining Talkdesk, Manno, Hertel, and Strahan recruited other Genesys personnel, including Morales, on behalf of and for the benefit of Talkdesk. They continued these efforts after joining Talkdesk. They accomplished this by utilizing their trade secret knowledge of the Genesys team's performance, compensation, level of job satisfaction, and account relationships that they had learned in their leadership roles at Genesys. Id. at 2-3, 8.

         With multiple former Genesys mid-market managers and sales executives now at Talkdesk, Talkdesk began aggressively targeting customers and prospects with whom the former Genesys employees were familiar. Talkdesk utilized Genesys' trade secrets in doing so. Within weeks of the employees leaving, Talkdesk targeted and underbid Genesys on multiple key opportunities for Genesys' customers. Hertel, Strahan, and Manno misappropriated Genesys' confidential information, including but not limited to pricing, quote information, and product roadmap information, and while employed by Talkdesk in senior sales roles, they used this information to underbid Genesys for business. Talkdesk usurped the business of Genesys' customers or potential customers in California and Hawaii using misappropriated trade secrets. The individual Defendants breached their contractual agreements with Genesys by disclosing confidential information and soliciting Genesys' employees and customers (Filing No. 89 at 3, 8).

         Before leaving Genesys to join Talkdesk, Morales secretly downloaded more than 700 confidential and proprietary Genesys documents, data, and materials constituting trade secrets. Id. at 3. Beginning in early September and continuing until her departure, Morales took Genesys' intellectual property, account and sales plans, pricing information, territory information, marketing information, customer account information and documentation, product information, and presentations. Among the files that Morales downloaded were twenty-one files from a folder titled “Pricing, ” nineteen files from a folder titled “QBR, ” nearly fifty files from a folder titled “Competition, ” a folder titled “RFP Information, ” nearly one hundred files from a folder titled “Campaigns & Prospecting, ” nearly one hundred files from a folder titled “Sales, ” nearly fifty files from a folder titled “Accounts, ” and more than one hundred fifty files from a folder titled “Product Information.” Morales took this confidential, propriety, and trade secret information to Talkdesk and has used this information for Talkdesk's benefit. Id. at 3, 9-14.

         Similar to Morales, Hertel accessed and converted over 24, 000 of Genesys' documents, many of which included confidential and proprietary Genesys data and materials constituting trade secrets, when he left Genesys and joined Talkdesk. Hertel took Genesys' proprietary and confidential information used for bids and used the information for the benefit of Talkdesk in attempting to win business for Talkdesk. In October 2018, Hertel disclosed Genesys' proprietary and confidential information to a Talkdesk executive vice president for the purpose of using the information in Talkdesk's bid with a California customer. Genesys demanded that Hertel cease his conduct, but he has persisted. Id. at 3, 15, 17.

         Strahan received communications from Talkdesk that identified September 17, 2018 as his orientation and “Day One”. Between September 17 and September 30, 2018, Strahan continued to email customers on behalf of Genesys from his Genesys email account. Unbeknownst to Genesys, during this same period of time, Strahan also completed training for Talkdesk, attended a sales conference on behalf of and paid for by Talkdesk, listened in on at least four live Talkdesk sales calls, listened to two other recorded sales calls, and took a trip to New Jersey on behalf of Talkdesk. Strahan was paid by Genesys up through his last day of work with Genesys, which was September 30, 2018. Prior to leaving his employment with Genesys, Strahan deleted several files and documents from his computer drive. Strahan also received and possessed Genesys' confidential information and trade secrets and used this information to usurp business for the benefit of Talkdesk. Id. at 19-20.

         On February 15, 2019, Genesys initiated this lawsuit (Filing No. 1). On July 2, 2019, Genesys filed a Second Amended Complaint, which is the operative complaint (Filing No. 89). In the Second Amended Complaint, Genesys requests injunctive relief and damages for the Defendants' misappropriation of trade secrets, breach of contract, and tortious interference with contract among other things. On July 11, 2019, the Defendants filed the instant Motion to Dismiss (Filing No. 97), arguing a lack of personal jurisdiction and a failure to state a claim for relief. Alternatively, the Defendants ask the Court to transfer the case to the Northern District of California.

         II. LEGAL STANDARD

         Federal Rule of Civil Procedure 12(b)(2) allows a defendant to move to dismiss a complaint where there is a “lack of personal jurisdiction” over the defendant. Fed.R.Civ.P. 12(b)(2). When deciding a Rule 12(b)(2) motion, the court accepts the factual allegations in the complaint and draws all reasonable inferences in favor of the plaintiff if they weigh on the issue of personal jurisdiction. Int'l Medical Group, Inc. v. American Arbitration Ass'n, 149 F.Supp.2d 615, 623 (S.D. Ind. 2001). But where a complaint consists of conclusory allegations unsupported by factual assertions, the complaint fails even under the liberal standard of Rule 12(b). Id.

         When considering a motion to dismiss for lack of personal jurisdiction, the court examines the sufficiency of the complaint, not the merits of the lawsuit. Id. The complaint does not need to include factual allegations concerning personal jurisdiction, but if the defendant moves to dismiss the action under Rule 12(b)(2), the plaintiff bears the burden of demonstrating the existence of personal jurisdiction. Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003). The court may consider affidavits and all other documentary evidence that have been filed, and any conflicts must be resolved in favor of the plaintiff as the non-moving party. Int'l Medical Group, 149 F.Supp.2d at 623.

         The level of the plaintiff's burden to show personal jurisdiction depends on whether an evidentiary hearing has been held. Purdue Research, 338 F.3d at 782. Where a hearing has been conducted, the plaintiff must show by a preponderance of the evidence that personal jurisdiction exists. Id. Where no hearing is conducted and the motion to dismiss is decided solely on written materials, the plaintiff must establish a prima facie case that personal jurisdiction exists. Id.

         Federal Rule of Civil Procedure 12(b)(6) allows a defendant to move to dismiss a complaint that has failed to “state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). When deciding a motion to dismiss under Rule 12(b)(6), the Court accepts as true all factual allegations in the complaint and draws all inferences in favor of the plaintiff. Bielanski, 550 F.3d at 633. However, courts “are not obliged to accept as true legal conclusions or unsupported conclusions of fact.” Hickey v. O'Bannon, 287 F.3d 656, 658 (7th Cir. 2002).

         The complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). In Bell Atlantic Corp. v. Twombly, the United States Supreme Court explained that the complaint must allege facts that are “enough to raise a right to relief above the speculative level.” 550 U.S. 544, 555 (2007). Although “detailed factual allegations” are not required, mere “labels, ” “conclusions, ” or “formulaic recitation[s] of the elements of a cause of action” are insufficient. Id.; see also Bissessur v. Ind. Univ. Bd. of Trs., 581 F.3d 599, 603 (7th Cir. 2009) (“it is not enough to give a threadbare recitation of the elements of a claim without factual support”). The allegations must “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Twombly, 550 U.S. at 555. Stated differently, the complaint must include “enough facts to state a claim to relief that is plausible on its face.” Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009) (citation and quotation marks omitted). To be facially plausible, the complaint must allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).

         III. DISCUSSION

         The Defendants seek dismissal of this action based on a lack of personal jurisdiction over Talkdesk, Morales, Hertel, and Manno and, alternatively, based on the failure to state a claim for which relief can be granted. The Defendants also alternatively ask the Court to transfer the case to the Northern District of California.

         As another district court within the Seventh Circuit succinctly noted, “jurisdiction is a threshold requirement that must be satisfied before a court can pass judgments on the merits.” Rawlins v. Select Specialty Hosp. of Nw. Ind., Inc., 2014 U.S. Dist. LEXIS 57076, at *4 (N.D. Ill. Apr. 23, 2014). “The court must satisfy itself that it can exercise personal jurisdiction over [defendants] before it addresses the merits of the case. Accordingly, the court must consider [the] motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2) before it can address the Rule 12(b)(3) and Rule 12(b)(6) motions.” Id. at *5. “If the court determines that it lacks personal jurisdiction over [defendants], it would be improper for this court to reach the merits of the case.” Id. “‘Without jurisdiction the court cannot proceed at all in any cause. Jurisdiction is the power to declare the law, and when it ceases to exist, the only function remaining to the court is that of announcing the fact and dismissing the cause.'” United States v. Rachuy, 743 F.3d 205, 211 (7th Cir. 2014) (quoting Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94 (1998)). For this reason, the Court first reviews the Defendants' Motion to Dismiss under Rule 12(b)(2).

         A. Personal Jurisdiction over Talkdesk, Morales, Hertel, and Manno

         “If jurisdiction is exercised on the basis of a federal statute that does not authorize nationwide service of process, the law requires a federal district court to determine if a court of the state in which it sits would have personal jurisdiction.”[1] Philpot v. Dot Com Plus, LLC, 2015 U.S. Dist. LEXIS 105016, at *2-3 (S.D. Ind. Aug. 11, 2015) (citation omitted). Indiana's long-arm statute, Indiana Trial Rule 4.4(A), governs personal jurisdiction in Indiana. “Although Rule 4.4(A) enumerates eight bases for the assertion of jurisdiction on the basis of a defendant's actions, the rule also includes a provision that ‘a court of this state may exercise jurisdiction on any basis not inconsistent with the Constitutions of this state or the United States.'” Annie Oakley Enters. v. Sunset Tan Corporate & Consulting, LLC, 703 F.Supp.2d 881, 886 (N.D. Ind. 2010) (quoting Ind. R. Tr. P. 4.4(A)). Therefore, a court has personal jurisdiction to the limit allowed by the Federal Due Process Clause. LinkAmerica Corp. v. Cox, 857 N.E.2d 961, 966-67 (Ind. 2006).

         For a court to have personal jurisdiction over a defendant, the Due Process Clause requires that the defendant have “certain minimum contacts with [the state] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.'” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)).

         Under federal due process standards, personal jurisdiction can be either specific or general. “If the defendant's contacts with the state are so ‘continuous and systematic' that the defendant should reasonably anticipate being haled into the courts of that state for any matter, then the defendant is subject to general jurisdiction.” LinkAmerica, 857 N.E.2d at 967 (citing Helicopteros Nacionales de Colombia, S. A. v. Hall, 466 U.S. 408, 415 n.9 (1984)). “If the defendant's contacts with the forum state are not ‘continuous and systematic,' specific jurisdiction may be asserted if the controversy is related to or arises out of the defendant's contacts with the forum state.” Id. (citing Helicopteros, 466 U.S. at 418 & n.8). “Specific jurisdiction requires that the defendant purposefully availed itself of the privilege of conducting activities within the forum state so that the defendant reasonably anticipates being haled into court there.” Id. (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-75 (1985)).

         Specific jurisdiction exists when a defendant has deliberately directed its activities toward the forum and the cause of action results from alleged injuries that arise out of or relate to those activities. See Burger King, 471 U.S. at 472. In Burger King, the Supreme Court explained the ...


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