MacDermid, Inc. v. Deiter: Second Circuit Approves Long-Arm Jurisdiction When Remotely Accessing a Computer within the Jurisdiction

The Second Circuit has approved long-arm jurisdiction over a foreign defendant who remotely accessed computers within the jurisdiction. In MacDermid, Inc. v. Deiter, 11-5388-cv, (2d. Cir. Dec. 26, 2012), the Court determined that such activity fell within the state’s long-arm statute and passed due process concerns.

Background

MacDermid is a chemical company with its principal place of business in Connecticut.  The company stores company data and runs its email system on servers also located in Connecticut.  Its employees, as a condition of employment, are on notice of this fact and agree not to transfer confidential information to personal email accounts. 

MacDermid’s former employee, Jackie Deiter, resides near Toronto, Canada.  Just before her termination, Deiter, in Canada at the time, allegedly sent confidential MacDermid data from her company email account to her personal email account.

MacDermid sued Deiter in the District Court of Connecticut, alleging violations of state laws against unauthorized access of a computer system and misappropriation of trade secrets.  Federal court jurisdiction was based on diversity citizenship under a Connecticut long-arm statute.

Deiter moved to dismiss for lack of personal jurisdiction, and the court agreed, saying that the long-arm statute did not reach Deiter’s conduct.

Court Determines Accessing an In-State Computer Remotely falls within Long-Arm Statute

On appeal to the Second Circuit, the Court determined that in order for the district court to have jurisdiction over Deiter, it must be proper under both the Connecticut long-arm statute and the Due Process Clause of the 14th Amendment.

The Connecticut long-arm statute provides that a court may assert personal jurisdiction over a nonresident who uses a computer or computer network located within the state.  Conn. Gen. Stat. § 52-59b.  Statute defines “computer” as:

an electronic, magnetic, or optical device or group of devices that, pursuant to a computer program, human instruction or permanent instructions contained in the device or group of devices, can automatically perform computer operations with or on computer data and can communicate the results to another computer or to a person.

Conn. Gen. Stat. §53-451(a).

The Court concluded that Deiter fell within the long-arm statute.  The Court understood the statutory regime to include “persons outside the state who remotely access computers within the state.”  Deiter remotely accessed MacDermid’s servers when she browsed company data and used her company email account to send that data to herself.  The Court also characterized the company servers accessed by Deiter as being a computer within the statutory definition.  Thus, Deiter remotely accessed a computer located in Connecticut, and thus the Court found that Deiter’s actions placed her within the state long-arm statute.

Court Finds Jurisdiction Proper Under Due Process

The Court then found that jurisdiction was proper under due process.  In general, a court may exercise personal jurisdiction over a nonresident defendant if there are minimum contacts between the defendant and the forum state.  World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980).  The contacts must be such that the suit does not offend traditional notions of fair play and substantial justice.  International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).

More specifically, courts have personal jurisdiction over a nonresident who has “purposefully directed his activities at residents of the forum where the litigation results from alleged injuries that arise out of or related to those activities.”  Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985).  The Court found that Deiter was aware that the systems she was using were located in Connecticut and that her use of such servers to send herself confidential material was the source of the alleged tort.  Further, the tort was directed at MacDermid, a resident company.

The Court was also required to determine if personal jurisdiction is reasonable under the Due Process Clause.  The Court used the Supreme Court’s five-factor test, where a court must consider (1) the burden on the defendant; (2) the interests of the forum State; and (3) the plaintiff’s interest in obtaining relief.  It must also weigh the interstate judicial system’s interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the several States in furthering fundamental substantive social policies.  Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 113-114 (1987).

The Court found these factors weighed in favor of reasonableness.  The Court noted that requiring Deiter to travel to Connecticut did not alone make personal jurisdiction unreasonable.  Further, both MacDermid and the State of Connecticut have an interest in resolving the matter in that state.  “Efficiency and social policies against computer-based theft are generally best served by adjudication in the state from which computer files have been misappropriated,” the Court said.  Thus, the Court concluded that personal jurisdiction is reasonable in this case.

Because the Court found that Deiter’s actions fell with the long-arm statute and passed due process, the Court reversed the judgment of the district court and remanded for further proceedings. 

Conclusion

The Second Circuit’s holding in Deiter shows that courts are willing to extend long-arm jurisdiction to those who remotely access computers within the jurisdiction.  While the defendant’s apparent knowledge of the location of the servers in this case was emphasized, it is yet to be seen how far courts will extend long-arm statutes to cover other internet-related activities.  Parties with long-arm jurisdiction issues should contact experienced counsel to see how Deiter may affect your case. 

Connect on Linkedin®

Jeremy Gray

Also See:

Parisi v. Goldman Sachs & Co.: Second Circuit Upholds Arbitration Clause Barring Title VII ‘Pattern-or-Practice’

Genesis Healthcare Corp. v. Symczyk: Divided Supreme Court Rules Against FLSA Plaintiff Seeking Class Status

EEOC v. United Parcel Service, Inc.: District Court Declines to Require Heightened Pleading from EEOC

Elgin v. Dept. of the Treasury: Supreme Court Precludes District Court Jurisdiction from Federal Employees Challenging Constitutionality of Workplace Statutes

Christopher v. SmithKline Beecham Corp.: Supreme Court Limits FLSA’s Overtime Provisions; Deference to Agency Guidance on Regulations