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Mueller Systems, LLC v. Teti

United States District Court, D. Massachusetts

August 4, 2016

MUELLER SYSTEMS, LLC, Plaintiff,
v.
ROBERT TETI and ITET CORPORATION, Defendants.

          Mueller Systems, LLC, Plaintiff, represented by Coby S. Nixon, Taylor English Duma LLP, pro hac vice, Todd E. Jones, Taylor, Busch, Slipakoff & Duma, LLP, pro hac vice, Kristopher I. Moore, Robinson & Cole & Nuala E. Droney, Robinson & Cole.

          Robert Teti, Defendant, represented by Donald W. Hawthorne, Axinn Veltrop & Harkrider, LLP, pro hac vice, Felix J. Gilman, Axinn Veltrop & Harkrider, LLP, pro hac vice & Joseph H. Skerry, III.

          ITET Corporation, Defendant, represented by Donald W. Hawthorne, Axinn Veltrop & Harkrider, LLP, pro hac vice, Felix J. Gilman, Axinn Veltrop & Harkrider, LLP, pro hac vice & Joseph H. Skerry, III.

          MEMORANDUM & ORDER

          NATHANIEL M. GORTON, District Judge.

         Mueller Systems, LLC ("plaintiff" or "Mueller Systems") brings this action against ITET Corporation ("ITET") and Robert Teti ("Teti") (collectively "defendants") seeking a declaratory judgment that plaintiff did not misappropriate defendants' alleged trade secrets or confidential information. At issue here is defendants' motion to dismiss for lack of personal jurisdiction and pursuant to the Court's discretion under the Declaratory Judgment Act. Alternatively, defendants ask this Court to stay the proceedings pending the outcome of related litigation in Canada. For the reasons that follow, this motion to dismiss will be allowed.

         I. Background

         A. Factual Background

         Mueller Systems is a limited liability company ("LLC") organized under Delaware law with its principal place of business in Middleboro, Massachusetts. Plaintiff does not divulge the residency of the member (or members) of the LLC but the Court presumes for the purpose of this memorandum and order that such member or members are jurisdictionally diverse from the defendants. Robert Teti is a resident of Ontario, Canada and the President and sole owner of ITET Corporation, an Ontario corporation.

         In 2002, Teti began developing an electronic water valve system. To facilitate development, Teti approached Mueller Canada Ltd. ("Mueller Canada") and the parties executed a confidentiality agreement in April, 2002. That agreement was executed by Mueller Canada on behalf of Mueller Co. Ltd. ("Mueller Co.") and created a perpetual confidentiality obligation for Mueller Canada, Mueller Co. and their affiliates, including Mueller Water Products Inc. ("Mueller Water Products") and Mueller International, LLC ("Mueller International") (collectively "the Mueller entities"). The parties worked for years to develop and test the valve, identifying some issues with the design.

         In September, 2009, ITET and Mueller Canada on behalf of itself and Mueller Co. entered a two-year Supply Agreement ("Agreement") for the ITET Digital Water System. Under that Agreement, Mueller Canada received the exclusive right to market the valve in North America in exchange for development, testing and mass production expertise, which were already being provided by Mueller. ITET retained ownership of all intellectual property and patents related to the valve. That Agreement expired in September, 2012 when Mueller Canada allowed the Agreement to lapse.

         In 2008, Mueller Technologies, LLC, acquired Arkion Systems Inc. ("Arkion") and changed its name to Mueller Systems. That newly formed entity is an indirect subsidiary of Mueller Water Products. In 2010, Mueller Systems began developing a remotely controlled water valve based on technology purportedly developed by Arkion. It began publicly advertising that valve as the 420 RDM device in 2012. After reviewing that technology and the patent Mueller acquired on it, ITET and Teti filed suit in Canada alleging, inter alia, misappropriation of confidential information and intellectual property in the development of Mueller's 420 RDM device.

         B. Procedural Background

         1. The Canadian Litigation

         In October, 2013, defendants brought an action in Canada against the Mueller entities, claiming, inter alia, that those entities as a common enterprise misused defendants' confidential information and intellectual property and thereby breached a duty owed based on the contractual relationship between the parties ("the Canadian Litigation"). In February, 2015, Mueller moved to amend their answer by withdrawing the admission that Mueller Systems was an unincorporated division of Mueller Water Products. Mueller would not consent to adding Mueller Systems to the Canadian Litigation on the grounds that they were already party to a similar proceeding in the Eastern District of Virginia. Mueller then filed a motion to dismiss in the Canadian Litigation, claiming, inter alia, that Mueller Systems was the sole developer of the 420 RDM device. In July, 2015, the Ontario court denied Mueller's motion for summary judgment and subsequently, Mueller Systems was added as a party to the Canadian Litigation.

         2. The U.S. Litigation

         In February, 2015, shortly before the Mueller entities amended their answer in Canada, Mueller Systems and Mueller International filed a complaint against defendants in the Eastern District of Virginia ("the Virginia Litigation"). Mueller sought a three part declaratory judgment stating that Mueller Systems and Mueller International were not infringing an ITET U.S. patent, that a Mueller U.S. patent was not subject to a claim of joint ownership by defendants, and that Mueller Systems and Mueller International did not misappropriate defendants' trade secrets or confidential information. During the early course of that litigation, ITET and Teti agreed not to pursue their two potential U.S. patent claims.

         2. Present Action

         In July, 2015, Mueller Systems filed the present action in the District of Massachusetts against defendants seeking a declaratory judgment that plaintiff did not misappropriate defendants' confidential information or trade secrets. One day later, Mueller Systems and Mueller International voluntarily dismissed their suit in the Eastern District of Virginia. In November, 2015, defendants filed a motion to dismiss this action for lack of personal jurisdiction and pursuant to the Court's discretion under the Declaratory Judgment Act.

         III. Analysis

         A. Personal Jurisdiction

         On a motion to dismiss for want of personal jurisdiction, plaintiff bears the burden of showing that the Court has authority to exercise jurisdiction over defendants. See Mass. Sch. of Law at Andover, Inc. v. ABA, 142 F.3d 26, 33-34 (1st Cir. 1998). The Court must take facts alleged by plaintiff as true and construe disputed facts favorably towards plaintiff. See Ticketmaster-New York, Inc. v. Alioto, 26 F.3d 201, 203 (1st Cir. 1994). Facts alleged by defendants are relevant as long as they are not contradicted by plaintiff. See ABA, 142 F.3d at 34.

         In a diversity suit, this Court acts as "the functional equivalent of a state court sitting in the forum state." See Astro-Med, Inc. v. Nihon Kohden America, Inc., 591 F.3d 1, 8 (1st Cir. 2009). As such, this Court must determine whether (1) jurisdiction is permitted by the Massachusetts long-arm statute and (2) the exercise of jurisdiction coheres with the Due Process Clause of the United States Constitution. Id.

         The Massachusetts long-arm statute, MASS. GEN. LAWS. ch. 223A, ยง 3, extends jurisdiction to the limits of the United States Constitution. See Tatro v. Manor Care, Inc., 625 N.E.2d 549, 553 (Mass. 1994). Accordingly, this Court need not further consider the statute's applicability and may proceed to the due process question. See Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42, 52 (1st Cir. 2002).

         Due process demands a showing of general or specific jurisdiction by plaintiff. See Negron-Torres v. Verizon Commc'n, Inc., 478 F.3d 19, 24 (1st Cir. 2007). Plaintiffs must demonstrate that defendants have made sufficient contacts with the forum state to ...


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